Automakers Bail-out

The big three US are looking to the US government for cheap loans to continue business as is. This would be a mistake for the automakers, the US government, and ultimately the US taxpayers. The first question to be asked in all this is why are the US automakers having a problem being competitive. In manufacturing there are three factors to being successful: cost efficiency of production, quality of product, and appeal of product. Currently the cost efficiency of production for the US automakers is prohibitive. While it cost the foreign automakers about the same to manufacture automobiles in the US, the big three automakers are burdened by legacy payments to retired United Auto Workers union members. This substantially increased the cost of operation for the big three. While it is not necessarily wrong to guarantee retired workers a pension, it was a poor decision to use operational budget for this rather than set up a separate fund/portfolio to do so. Considering that the quality of US autos have improved significantly in the past decade, as well as the appeal of SUVs and pickup trucks remain high for US automakers (their major products rather than passenger cars) I believe this aspect of cost inefficiency to be the primary factor for the big three financial woes at this point. For the US government to bail out the US automakers as is would only perpetuate a broken system and reset the date of failure. (Didn't we bail out Chrysler in the 80s?)

I see two potential solutions.
Firstly, let the automaker fail. The benefit would be that in the restructuring and reconstruction of the automaker, a better and more efficient company would arise that would then be competitive. This is the most free capitalist approach to the problem and sets the best precedence for other large companies facing similar problems. We cannot be bailing large inept companies out over and over again. There can be no true success without a chance of failure. I believe this to be the superior, though harder, solution. Harder to do as well as harder to suffer through. I am skeptical this option will be chosen.
Secondly, the federal government could assume the retirement cost and thus remove the financial burden from the big three automakers, thus allowing them a chance of being cost efficient again. Naturally this sets a poor precedence for future bailouts. However, this allows a political solution for politicians wanting to, or expected to, do something to help. And this option would certainly be more palatable than a hand out to the big three, whether they take on new management of not.

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