The Auto Industry (UAW) Bailout

Yesterday, in The New York Times Mitt Romney wrote an op-ed piece on the proposed  bailout of the automobile industry.  Mitt Romney has in interesting take on this because he grew up in Michigan and his father was an auto company executive.  In the editorial, he states:

"Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota's Avalon. Of course the Avalon feels like a better product -- it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable."

CNN ran an article today about people in an Ohio diner in an area where auto workers live.  These people live near (and many work in) a nearby Honda factory which is doing very well.  As people in the auto industry, they understand what union contracts have done to the American car manufacturers.  The consensus of opionion there was that backruptcy would be a good thing, because it would allow the car companies to renegotiate their contracts and to change their business plan to a profitable one. 

Giving money to Detroit auto companies right now is not constructive--until they change their ways, they will only need more.  They are not helped by the fact that Michigan is a one-party state which has been ruled by Democrats for some time now.  The Democrats have made it a place of high taxes and overregulation.  When they can, businesses have moved elsewhere to avoid both.  If you check the census figures over the last four years, you can see that generally speaking, states with high taxes and overregulation of business have been losing population or staying the same.  States with lower taxes and less regulation have increased in population and job growth.

The bailout bill has not yet been voted on because it does not have the votes to pass, but it will be back in early December.  All of us need to contact our Senators and Representatives and ask them to oppose it.  Not only is it throwing good money after bad, but to ask Americans to spend recklessly in a shrinking economy is just not right.  Bankruptcy is a much better option--even though if backruptcy occurs rather than the backup, Congress would not be able to get itstentacles into the management and running of the American auto companies.