Detroit Wants $14 Billion More


Anyone who thought the last dose of auto bailout money was the last we’d be asked for was kidding himself, and anyone who thinks this $14 billion request will be the last is also kidding himself. The trouble, though, isn’t really the price tag. It’s the conflicting goals of the enterprise. Amidst an enormous recession, there’s a fairly compelling case for spending money on this scale as what amounts to a jobs policy. Standing by and letting the level of unemployment shoot up further would not be helpful to the larger macroeconomic situation. But to really do this right would amount to the management and owners of the companies just admitting defeat, and saying they want the government to keep their assembly lines running as welfare cases. They don’t want to do that for a whole variety of reasons. Instead they want to say that this is part of a plan to save their companies and the “domestic” auto industry. But that means cutbacks:

In return, the two companies also promised to make further drastic cuts to all parts of their operations, in the hope that they can eventually strike a balance between their bloated cost structures and a dismal market for new car sales.

G.M., for example, said it would cut 47,000 more of its 244,000 workers worldwide; close five more plants in North America, leaving it with 33; and cut its lineup of brands in half, to just four: Chevrolet, Cadillac, GMC and Buick.

There’s a business case for big layoffs. GM is hardly the only firm undertaking them. But if spending tens of billions of dollars on a jobs program makes some sense, spending that kind of money to help keep the management and marketing infrastructure of the firms in place as they layoff and furlough their workforce doesn’t. But you sort of need to choose what you’re doing here—are taxpayers creating makework jobs to prevent the rust belt from becoming the new dust bowl, or are we trying to provide assistance to our “national champion” firms and help them compete? If it’s the jobs we care about, we’d probably be better off spending the money giving different jobs to auto workers—spend $14 billion+ on Detroit to Chicago high-speed rail or something (ditches, anything)—which would have the same beneficial employment effect, avoid bailing out shareholders and managers, and help reduce auto industry overcapacity thereby lending a helping hand to Ford and to U.S. production of “Japanese” cars. Otherwise, if every country around the world insists on sinking more and more money not into its nation’s car companies instead of into its people who work for car companies then we’ll have a situation where the whole industry just keeps shrinking and sinking slowly.