The government should do all it can to resuscitate consumer demand before succumbing to direct aid for car makers, said The Guardian in an editorial yesterday. Excerpts:
Now that the world’s automotive industries have followed the banks into a full-blown crisis, governments are being asked, once again, to fill the black hole with taxpayers’ money. Unless something unexpected happens, they are bound to be followed by other manufacturers, and maybe service industries as well. The US Congress this week votes on $15 billion in bailout loans for Ford, GM and Chrysler, extracted from an existing program to promote green technologies. In Britain the escalating troubles of the car industry — cue in a 37 percent fall in sales in November, the fall of Honda’s F1 team and the crisis at Wagon Automotive — will provide the Business Secretary Lord Mandelson with the first test of his policy of “smart” intervention. Both the British and US governments fear that if a major brand crashes sales will cease, possibly irredeemably, reducing tax revenues and increasing social outlays. Lord Mandelson will be mindful that the government’s £1.5 billion rescue of British Leyland over 30 years ago was not a success and some retrospective “smart” thinking would have put the company into administration, with brands such as Land Rover, Jaguar and Mini sold off separately. There is a new problem. This is the first recession since so much of Britain’s manufacturing base and utilities passed into foreign hands. The worry is that when it comes to the crunch multinationals will close overseas plants rather than domestic ones and overseas utilities will not pass on cost decreases arising from oil.
