Tuesday, December 23, 2008

Auto Bailouts and Sinking American Prospects

In the 1970s, my dad bought American cars on point of principle. He thought it was right to support the North American auto industry. Eventually, however, he found that American car manufacturers were doing him no favors in return. So since the late 1970s, he has bought Peugeot, Saab, Volvo, and Acura (which is Honda). I drive a Honda Odyssey.

As consumers, we direct our money to the companies we think will give us the best products. But recently, the so-called Big Three American automakers went to Washington asking for $15 billion of your money and mine to make up for the money we have not been spending on their cars. The trouble has been not only that many Americans have been preferring the products of other companies. But even when we have been buying GM, Ford and Chrysler, we have been paying only the market price, which is considerably less than what the companies need to make a profit. So having failed in the marketplace, they asked the government to take from us what we have freely chosen not to give them.

Congress refused. But on Friday, President Bush gave them, by executive decree, over $17 billion from the Congressionally established $700 billion slush fund (TARP, the Troubled Asset Relief Program) designated for stabilizing the financial markets.

George Will sees not just an unwise use of public funds, but a deterioration of our constitutional system of government.

The expansion of government entails an increasingly swollen executive branch and the steady enlargement of executive discretion. This inevitably means the eclipse of Congress and attenuation of the rule of law.

Mark Steyn tells us why these car companies are failing and will continue to fail.

General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small loss-making auto subsidiary. The UAW is AARP in an Edsel: It has 3 times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people. How do you make that math add up? Not by selling cars: Honda and Nissan make a pre-tax operating profit per vehicle of around $1,600; Ford, Chrysler and GM make a loss of between $500 and $1,500. That's to say, they lose money on every vehicle they sell. Like Henry Ford said, you can get it in any color as long as it's red.

Steyn actually takes you on a jolly ride through several aspects of America's present decline: "See the USA from your Chevrolet: An hereditary legislature, a media fawning its way into bankruptcy, its iconic coastal states driving out innovators and entrepreneurs, the arrival of the new messiah heralded only by the leaden dirge of "We Three Kings Of Ol' Detroit Are/Seeking checks we traverse afar," and Route 66 looking ever more like a one-way dead-end street to Bailoutistan."

But he ends upbeat, wishing us all "a very Hopey Changemas."

Whoever said the era of Great Canadians would die with William Shatner haven't been reading Mark Steyn.

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