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Nick at BSB posted today on his opposition to an auto industry bailout.  I disagree, mainly because I think an auto bailout is an opportunity to drag the industry kicking and screaming, finally, into green technology. 

I have two main points of disagreement with Nick.

First, Most of the banks who the government bailed out earlier this year were profitable mere quarters ago, and were simply the victim of a financial panic right out of the history books. GM, on the other hand, hasn’t made a profit on its core North American automotive business in almost five years. Thus, a bailout of GM presents a much greater risk to taxpayers than bailing out a bank. 

First, Nick has a fundamental misunderstanding what happened to banks.  It wasn’t some panic, it was created by the financial industry itself, with total knowledge of just how much chaos they risked.  This wasn’t some “victim” situation.  

Second, a main reason GM and other American automakers are failing is similar.  They have never invested in green technology, in fact, they have lobbied actively against it, and put money into government to make sure they didn’t have to follow a lot of other rules, too.  Now they are fucked.  Good.  That’s why the core business should be re-made, focusing on green technology, which a bailout could quite easily force.  

Nick then veers into craziness.

Third, in bankruptcy court, GM could be freed of its crushing pension and health care obligations to its retirees and become a car company again. The money which GM spends on its retiree benefits is money that the other guys are plowing back into research and development of new cars, and it shows in the products they put out. Retirees have safeguards like Medicare and the Pension Benefit Guaranty Corp., and while those benefits are less generous than the ones they are getting under GM now, its sure as hell better then nothing, which is what most Americans have in the age of 401Ks and at-will employment. 

Umm….what?  Aren’t you a Democrat, Nick?  Since when do Democrats advocate for private employers to cop out of benefit packages negotiated by a collective bargaining unit?  You think the hundreds of thousands of auto industry retirees currently relying on these benefits planned on their employer being incompetent?   Throw them all out on Medicare?  Is that a joke?

Where I come from, a contract is a contract, and dumping the costly safety net which unions bargained for in return for decades of hard work from their members isn’t any less wrong if a bankruptcy court orders it, which I am pretty sure won’t happen anyway.

Here’s how an auto industry bailout should look.  

They get the money if, and only if, they use a massive chunk of it to retool the entire industry toward green cars made in America.  

Period.  

Opposition to bailouts on philosophical grounds is fine.  I don’t happen to agree.  If a company needs a government bailout, that is the best position government will ever be in to force on the company a course that is in the best interest of the public.  

They played their little free market game, with no rules, lobbied to keep away rules, bought and paid for lobbyists and legislators to put into their pocket, and they still failed.  If they don’t want the pain of capitalism, but only the glory, then they have to bend over and take their bailout however Barack Obama tells them to.