Canada and the US are talking about bailing out the North American auto companies: PM hints at auto bailout
This strikes me as wrong for several reasons:
- Why should governments be bailing out companies that don’t have a sustainable business model? They’re losing money for many reasons including a cyclical market and bad decisions in the past.
- Propping up failing businesses is a drain on the economy and hurts productivity. Further, it’s a disincentive for innovation because every car sold from an artificially propped-up company is a car not built by a new and innovative competitor. (One example brought up on CBC: Canada has a very innovative car company called ZENN. Guess where the car can’t be sold due to government regulation? Canada)
- I think the American car companies have consciously fought innovation for the last few decades, which is why I’ve never bought any of their products. Now we’re proposing I pay them a few thousand dollars of my tax money as a reward?
- If people are set on handing out $4 billion, as proposed in Ontario, maybe a better idea is to let the companies fend for themselves and give a share of that money to anyone who loses their job in the mix, to help the transition to a new job. Let’s say 100,000 Ontarians lost their jobs, that would be $40,000 each, which would be a big help.
As much as I dislike the American car companies, the people that would really be hurt by their collapse would be the workers. While I think everyone may be better off in the end, it would be a difficult time. For this reason, the only kind of bailout I’d be willing to consider (like I had a say in the matter) would be to alleviate some of the car companies crippling pension liabilities, at least until the pension bubble bursts. If the companies collapse, the governments will step in to take some of the pensions anyways, so it’s inevitable. Further, the big 3 really are crippled compared to the competition due to the pensions because they suck up so much cash. While this is their own fault, it’s a small set of bad decisions that have shaped their entire future.
However, after any kind of help like that, the companies would have to left to fend for themselves. If they still failed there wouldn’t be any more excuses and they should be allowed to bankrupt.