The call by the three big US automakers, General Motors, Ford and Chrysler for $25 billion on US taxpayers’ money to help them stave off collapse should give serious pause for thought. The key argument is that between them, the three auto giants are responsible for some three million jobs and at the very least hundreds of thousands of these could be lost unless the companies are bailed out.
But the question is: If the Bush administration accedes to this request, where is the financial support for ailing corporations going to stop? Help out the automakers and other big employers such as the plane makers will feel that they too have a legitimate call on the public purse.
The harsh truth is that to a great extent GM, Ford and Chrysler are makers of their own misfortunes. They have simply been producing too many of the wrong sort of cars. Despite clear evidence of rising energy costs and the demands for a more carbon-friendly world, these firms have largely set their head against building vehicles that will meet these demands.
Once Americans didn’t give a thought to filling up their gas-guzzling cars. The price of gas was so cheap. But the world has changed and changed not suddenly but steadily over the last decade. Yet where are the US-made economical models that American motorists now want to buy? They hardly exist. It is, therefore, their commercial strategy which has led the automakers into this crisis and it seems dubious, to say the least, to expect the American government to pick up the tab for their failure.
The multitrillion-dollar rescue of the world’s financial system was a different matter. Even though the banks were the main culprits in the collapse of investor confidence, for them to have failed en masse would have led to complete catastrophe. Though with gritted teeth, governments simply had to rescue the majority of them, with the corpses of a few such as Lehman Brothers left on the ground as a condign lesson to the rest. No such imperative exists for manufacturing companies, however huge employers they may be.
These companies have to face up to the consequences of their misjudgments. If they fail then there will be other investors, most probably from outside the US, who will be in a position to buy up some of the assets and rebuild the businesses in the US or abroad or both.
Once again, of course, those who will suffer will be the little people, the workers who just did the job they were asked to while highly paid top executives were steering their firms toward a wreck. It would perhaps be better to steer a $25 billion rescue package toward these individuals helping them over a period of unemployment until they can find work with wiser employees. The core principle is that managements that have got it wrong should not expect the cost of their errors to be indemnified by taxpayers.
