Tuesday, December 02, 2008

If Congress Bails Out The Big Three, It Needs To Help Them Sell The Right Cars

Detroit's automakers were back in front of Congress today seeking a $25 billion handout. We predict that's just a downpayment at the rate GM, Chrysler and Ford would burn through the money.

Previously, we said we're opposed to bailing out the domestic auto industry. We still are--Chapter 11 bankruptcy would help them go through the necessary restructuring faster and more efficiently.

Our guess, however, is that Congress will give the not so big three the "loan" they want. And before we bemoan the expenditure of $25 billion on the auto industry, we ought to look at the tens of billions of dollars Congress has been throwing at the ethanol industry over the past few years!

In any event, if Congress wants Detroit to build better, greener cars and wean itself from addiction to SUV's, then Congress needs to help out by enacting policies that will severely discourage consumers from wanting gas-guzzling SUV's. That includes enforcing stricter fuel economy requirements, taxes on gas guzzlers, subsidies for plug-in hybrids and electric vehicles, and other policy changes.

A carbon tax would also do wonders in this area, by raising gasoline prices. We doubt Congress has the political will to do most of this. Congress seems to think it can have everything--high wages and benefits for auto workers; guaranteed employment; low gas prices and green cars. Ain't gonna happen.

Instead, we'll probably get something that looks like the ethanol debacle.

1 comment:

Anonymous said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.