RCP: Bailout Nation? Obama & The Big 3.

The bailout would be of the United Auto Workers as much as of the automakers. It's the UAW that saddled the Big Three with unsustainable labor costs and obligations to retirees. Detroit has desperately been trying to get out from under this burden, but Ford still lost $1,467 per vehicle in 2007, while GM lost $729 and Chrysler lost $412. Where the UAW doesn't reign, the industry thrives. Toyota and others profitably manufacture almost 4 million cars in nonunionized states in the South.

The case for the bailout is that the job losses from a GM going down -- 100,000 directly, and many more indirectly -- would be too painful to bear, and the government would be left holding the bag on GM's pensions. This line of reasoning conceives of GM essentially as a job programs and welfare agency.

Lowry nails the issue on its head. See, the problem with the American auto industry is two-fold. Since the energy crunch of the 1970's they have not been able to keep up with foreign competitors and produce vehicles that people want to drive. Outside of the trucks and sports cars, there is little enthusiasm behind a domestic car purchase. Sure, you may be driving a Pontiac, Ford or Dodge, but my guess is you picked it up because it was cheaper than the foreign counter part, you could get better financing, or you felt a patriotic urge to support your fellow citizens. No? The second half of this situation is the UAW. The big three have faced dwindling sales for decades, and have not had the ability to tell the Unions to back-off.

Instead, the auto-industry taps the american tax payer to fund their unsustainable pension plans. Nice, huh? Got a friend or relative that is employed by GM? Grreat. Next time you see them, ask them why you hsould be contributing to his pension plan. Note their response.

Washington Post business writer Steven Pearlstein suggests a compromise: Only commit government funds if the auto companies taking them go bankrupt. A bankruptcy court can reduce the obligations to retirees, make it possible for Chrysler and GM to pare back their unnecessary dealerships, and scale back wages and benefits. Top management should be fired. All of this can be set in a "prepackaged" bankruptcy that won't disrupt operations.

Failure is not pretty, but it does provide valuable learning. If I were a union guy working for the auto-industry, I'd be figuring how I could leave the union. Then I'd be looking for work at the closest Toyota/Honda plant I could find.