Thoughts on the Auto Industry
Thoughts on the Auto Industry
2008-11-19 11:25:27 by Andrew Hitchcock G+

Recently there has been a lot of talk about bailing out the automobile industry. I'm against bailouts in general and for the auto industry in particular. They've resisted market changes and are being punished for it, deservedly so. They also seem to be inefficiently run.

People have been rationalizing the bailout on a number of grounds: "The banks got a bailout!", "A million jobs would be lost!". First, the American demand for automobiles isn't going to magically drop to zero (as much as I'd like it to). If one company completely disappears, the demand for cars (and the jobs that accompany it) will be picked up by the other manufacturers. Politicians talk about preserving jobs, but what goes unsaid is that they want existing jobs protected at all costs. Heaven forbid a job be created at a competitor, or that the new efficiencies that made that job obsolete go on to create a new job in another field or industry. A job in and of itself is not worth anything. Keeping someone employed who creates a net negative on the economy is not sustainable. If we improve the operating efficiency of these automakers (at a cost of jobs), then new jobs would be created in other areas with the newly found savings.

Also, I'm tired of people saying manufacturing jobs are important because they "make something". Service oriented jobs make something too, its called wealth, have you heard of it? Just because there is a physical product at the end of the day doesn't mean the job has more value than a service based job. Someone at a financial company that deals with money all day also adds value, if they are improving the efficiency of their business and the economy, otherwise no one would pay them. I work in the service industry, I write software, and judging from the average salaries in my field, I'd say companies believe we add value. If you are creating wealth as part of your job, you are a positive contribution to the economy.

The notion that we, as a nation, don't produce goods is inaccurate. Just because we no longer make cheap steel and other raw materials, doesn't mean we don't make things. There is little money in basic raw materials, which is why we let others do it where the labor is cheaper. America makes advanced and expensive products, such as jet-engines, airplanes, and train locomotives. Intel and IBM have fabs in the United States and a whole green manufacturing industry is popping up in Silicon Valley. We make stuff, alright?

Finally, a bankruptcy could be good for these auto companies. It'd let them restructure themselves and lower costs. If we just keep propping them up with money, they'll keep burning through it and won't improve. By taking money from efficient, profitable businesses and giving it to the automotive companies, which is effectively what would happen, we are removing efficiency from the market and making us all that much poorer.

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