Tuesday, February 21, 2012

Stop Glamorizing the Detroit “Bailouts” and Tell the Whole Story

Jeff is absolutely right on this (read below). And two big things that the people talking about how wonderful the bailouts were for the auto industry neglect to mention- Ford played by the rules, got its house in order before things got really ugly, and wasn’t bailed out. They’ve benefited from government loans and such in the past, but they never got to the impending bankruptcy and beyond doom point that GM and Chrysler did that precipitated their bailouts. So Ford shouldn’t be included in any of these “why we should be glad we didn’t let Detroit go bankrupt” graphics, if anything it should be compared against them. Second, Chrysler’s bailout led to them being a partially German owned company to now being almost 60% owned by an Italian company. Although they’re still huge in the US, calling them an American auto company is like calling Toyota’s American operations an American car company. Arguable, but the head honchos and the biggest shareholders aren’t in the US. I’m thrilled that GM, Ford, and even Chrysler are making better cars and getting their financial houses back in order. I love cars and love seeing “our” companies finally competing in a serious way with the best foreign makes. But graphics like this and convenient over simplifications of what actually happened are a good example of what’s wrong in politics right now.
Why we should be glad we didn’t let Detroit go bankrupt(like Mitt Romney wanted).
Perhaps the average person thinks that declaring bankruptcy means that you go out of business.  But informed people know that this is wrong.  Bankruptcy can be a method by which a company sheds itself of costly liabilities in an effort to become healthy.  Almost all of the airlines have gone through bankruptcy, and by any measure, they are all better for it.
When Romney (and the rest of us) were suggesting that the auto industry declare bankruptcy, we were suggesting that the automobile industry use the same renegotiation procedures utilized by countless other companies that have returned to profitability.  In other words, we were suggesting that creditors (who chose to deal with the auto industry) take the hit instead of taxpayers (who did not choose to deal with the automobile industry).  We were suggesting bankruptcy as a way to save the industry, not kill it.
All of those sales, jobs, etc., in the graphic above—all of them might have been had if the auto companies had gone through bankruptcy.  And it’s not unreasonable to suggest that the industry might have been better off in the long run if they had gone through bankruptcy.  
Whoever made the graphic above probably knows that the average person thinks that declaring “bankruptcy” means going out of business.  They probably also know that this is wrong, but they still made the graphic anyway.  And the shame of this is that it teaches politicians the worst lesson possible … namely, to lie and pander, rather than talk openly and honestly about real solutions to real problems.

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