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Good Money After Bad

If the world's citizens will not freely lend the Big Three automakers money of their own free will, then Congress is considering using force to make it happen.

Auto industry allies hope to secure up to $50 billion in federal t loans this month to modernize plants and help struggling car makers build more fuel-efficient vehicles.

Congress returns this coming week from its summer break, and the auto industry plans an aggressive lobbying campaign for the low-interest loans.

I wrote earlier on why we should not be afraid to let GM fail.  Paul Ingrassia makes this point:

Any low-interest loans to develop fuel-efficient cars should be made available to all car companies, not just the Detroit Three. The law passed by Congress last year is framed to make this highly unlikely. But if developing fuel-efficient and alternative-energy cars is deemed worthy of taxpayer subsidies for public-policy purposes, it's just common sense not to put all our eggs in Detroit's basket.

I would have gone further and said that US automakers are perhaps the last one's one would entrust with limited capital resources to develop such a new technology.  What would have happened to the PC revolution had the government circa 1975 limited all the available investment capital for new computing technologies to IBM, DEC, Honeywell, etc.

Posted on September 8, 2008 at 08:29 AM | Permalink

Comments

Hey, Congress has to help out all of those union workers employed by the Big Three. Everybody knows which way they vote.

Posted by: Jim Collins | Sep 8, 2008 9:31:51 AM

My question is why would Detriot want to mondernize its existing plants? If I were the CEO of one of the big three, I would be looking at relocating all my plants to right-to-work states. Running away from the current business model (unions, pensions, low automation, production limited plants, ect...) is the only way Detriot is EVER going to be profitable again.

Posted by: NASCAR Wife | Sep 8, 2008 10:33:12 AM


I'm sure it's just a coincidence this issue comes up 60 days before a presidential election. I mean it's not like Michigan is going to be a crucial swing state, right?

Jeff

Posted by: Jeff | Sep 8, 2008 11:39:45 AM

There's a bit of talk that the Chevy Volt is less of a useful production model and more of a stalking horse for a government bailout. The more information that comes out about it, the more it's the wrong car, for the wrong price, with the wrong specs. But GM needs it to show that they actually are *trying* to develop more efficient vehicles. And why do they need to do that? To convince the government to bail them out.

Posted by: Highway | Sep 8, 2008 3:39:37 PM

I think we need a Constitutional Amendment barring the federal government for loaning money to or guaranteeing loans for any private enterprise.

Posted by: Stephen Macklin | Sep 8, 2008 3:52:56 PM

We bailed out Chrysler back in the 80's. Each of these companies really isn't going to have an incentive to improve its financial condition if the government keeps bailing each one out every now and then.

Posted by: Ed | Sep 8, 2008 7:54:47 PM

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