The current hot button appears to be whether US automakers should get a bailout package from the Feds. The debate starts with the fact that the Feds doled out cash to the banks for the sake of keeping the economy afloat. The debate continues with some saying that the automobile industry is so much apart of the US economy that saving the jobs associated with the industry is paramount to keeping the US economy afloat.
And I’ll agree – the auto industry is a huge part of the US economy. And a very large part of the Ohio economy. But I think there’s a difference between bailing out the banking industry and bailing out the Big Three automakers. I didn’t think that bailing out the banks was a good idea until I heard the This American Life episode that explored the topic from various perspectives. It was the best explanation I’d heard and, okay, the bailout for banks probably had to happen. Its best that you listen to it for yourself. Click here to read/listen.
The banking industry and the US auto industry both share one common problem – bad decision making. The banks developed products (loans) that met consumer demand and got burned. The US automakers developed products – wait – the US automakers haven’t developed much of anything and that’s the problem. So while banks took a stab at creativity, the Big Three kept doing what they have always done.
The 2004 domesitc-model car that I have today is essentially the same car that I had purchased in 1994, with the exception that the 1994 model had fewer problems and was slightly more fuel efficient. I purchased it when the last one wore out because I understood the importance of the domestic auto industry to the Ohio economy. However, if I have to buy another car, it will not be a domestic model. Shoddy workmanship and downright pathetic customer service being the reasons.
Innovation in the auto industry hasn’t come from the Big Three and that’s precisely why Toyota and Honda have begun to eclipse them. Two companies chose to meet consumer demand and three companies chose not to.
Think of it as if you were trying to sell your house. If there are several homes on your block to choose from and if the homes are essentially alike, then as the seller you’d want to make sure that your house has the amenities that buyers are looking for. If it doesn’t then you’d probably spend a little money to make the necessary upgrades to make it more appealing. If the neighboring house sells first because it has a new furnace, thermal windows, a fuel efficient water heater and a modern kitchen it should be obvious as to why it sold first.
If this went on for five or ten years you’d probably figure it out and invest in the upgrades necessary to sell your house. US automakers haven’t invested in upgrading their product so the consumer chose to buy from those who had. Should the Feds bail them out for failing to remain competitive?
While the flow of credit is essential to the US economy, shoddy products are not. Bolstering an industry that has simply failed is no way to help the long-term US economy. Failures will be replaced with successes and through success a stronger economy will prevail.
Good perspective Jeff. It’s really frustrating and sad to think of all their missed opportunities. And it just makes me feel like they deserve to fail.
I had a foreign car but the last one I bought I bought American and unfortunately I am regretting it. I drove my foreign car for 6 years with no problems and my domestic car has been a pain in the butt since day one. I agree we should support our country and our industries but I need a solid product to back up my substantial investment.
I wanted to buy an American car this spring, but I’m a cold-hearted jerk and my allegiance to Ohio and the American automotive industry were lesser than my desire to get a decent car. The truth as I see it is that Americans will continue to buy cars for the foreseeable future, but the Big Three failed to accept the transition to a competitive market (in the 70’s and 80’s), to a “greener” consumer (in the 90’s and 00’s), and the future, sacrificing short-term profits on SUVs for innovation and flexibility.
Primo example of why to say NO.
“Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone. … Wagoner’s private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.”
http://thinkprogress.org/2008/11/19/big3-private-jets/
While I’m not convinced that the bank bailout was necessary or properly arranged, I do agree with you about NOT bailing out the “Big 3.” (I haven’t read the link you posted on the bank bailout yet, but I promise I will.
One other comment – about the idea of “allegiance to Ohio” or to the “domestic auto industry”… all of these large auto companies (GM, Honda, etc) are global companies. Depending on what you car you buy, you might be directly “employing” more Ohioans buying a “foreign” car. For example, if you buy a Honda made in Marysville OH or a Toyota made in Georgetown KY. As opposed to a Aztek (GM) made in Mexico or a Fusion (Ford), aslo made in Mexico. (Not to pick on Mexico.)