Commentary: Form a line for bailouts

In this July 15, 2008, photo, a General Motors sign is seen through a fence at an auto plant in Arlington, Texas. (AP Photo/LM Otero)
In this July 15, 2008, photo, a General Motors sign is seen through a fence at an auto plant in Arlington, Texas. (AP Photo/LM Otero) AP

The Charlotte Observer and its parent, McClatchy, are hurting a bit at the moment. We'd like a government bailout.

Circuit City just filed for bankruptcy. It could have used a bailout.

Bruton Smith has lost $1 billion. Bail him out?

Pizzeria Uno is struggling. The future of deep dish pizza could be at stake.

OK, so Congress probably won't approve pork for pork toppings, but congressional leaders' consideration of a $25 billion bailout for the automotive industry, on top of $25 billion already granted, does make one wonder where it will stop.

Detroit's "Big Three" – General Motors, Ford and Chrysler – are intensely lobbying President Bush, President-elect Obama and Democratic congressional leaders to have taxpayers come to their rescue. They shouldn't do it.

Pain is coming either way

The bailout of the financial industry was an incredibly hard pill for taxpayers to swallow. But in that case, the fate of the economy for years was arguably at stake. Whatever the causes of the financial industry's problems, and there were many, the credit crunch and its tentacles have the potential to grip virtually every American.

I don't underestimate the centrality of the Big Three to American manufacturing. Hundreds of thousands of jobs are at stake, including many in North Carolina, and their failure would ripple through the economy.

But there's going to be massive pain in the automotive industry, bailout or not. These companies' problems – piles of debt, unsustainable labor agreements, fortress-mentality management and a failure to adapt to consumer desires – are so deeply engrained that a fundamental restructuring that will eliminate thousands of jobs has to occur under any scenario.

Government should step in only where the free market fails. This is a case where the market is working; only the companies are failing.

The reason to commit huge amounts of taxpayer money to this private industry would be to put it on a path to long-term, sustained success. We have no reason to believe that a federal bailout would do that. These unrepentant companies would burn through the help in short order and be back asking for more.

Bankruptcy would not be the end

A hugely expensive patch does nothing to fix the deep-seated troubles of the industry. A bankruptcy filing has at least as much chance of forcing industry and union leaders to confront their problems and find a successful path going forward.

Maybe then they would become more like Honda and Toyota, which are not seeking a government handout, and which employ tens of thousands Americans at American plants. They've been innovating for years, producing the smaller, fuel-efficient vehicles most Americans now want, and keeping their labor costs manageable.

As they were doing that, GM North America chairman Bob Lutz was saying in a 2005 blog posting:

"It seems that ever since we announced we were bringing out our next generation of full size trucks and utilities, people seem to think it's unwise. I'll admit that on the surface it may seem incongruous to introduce vehicles like this, given today's fuel prices. But I have to tell you, these products still make a lot of sense."

Rewarding that kind of mismanagement is wrong.

The biggest thing here is principle. A bailout says you as a company can do pretty much anything you want. If you fail, no worries – the government whose regulation you have spent years decrying will step up and bail you out – with our money.

But only if you're big, and have lobbyists on Capitol Hill.

About the writer

Taylor Batten is the editor of The Charlotte Observer's editorial pages. Reach him at tbatten@charlotteobserver.com.

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