The Sophian

Issue date: 12/4/08 Section: Opinions

The automotive industry - choking to death on its own exhaust - recently begged Washington for funds in an attempt to avoid bankruptcy. Like the rest of the economy, the "Big Three" manufacturers of the auto industry - General Motors, Ford Motor and Chrysler - have suffered recently. General Motors alone has lost more than $18 billion this year, and the industry overall has fallen 14.6 percent. The automakers asked for a portion of the $700 billion rescue package - even though it is not meant as an economic stimulus - specifically $25 billion in cash ads and $25 billion more in loan guarantees. Congress, reluctant to simply hand out $50 billion of taxpayers' money without any guarantee of improvement, gave the automakers two weeks to design a plan for rebuilding their companies.

There are many good reasons why automakers should get the money. Without an immediate bailout from Congress, it is possible that General Motors could go bankrupt by the end of the year. This scenario could lead to their parts suppliers suffering and even shutting down. Because much of the automotive industry is connected, suppliers' failures would affect Ford and Chrysler as well in a domino effect damaging the whole industry and leading to job loss on an even greater scale.

But calm down, Chicken Little; the sky might not be falling after all. The automotive industry has been limping along for years. Held back by uncompetitive designs and saddled with wasteful executive spending, it is no wonder the giants are not what they used to be. Since 2006 alone, 100,000 jobs have been cut from the once-booming industry. As Mitt Romney suggested in an Op-Ed piece to the New York Times, the automaker's financial crisis might be just the incentive they need to finally restructure themselves into profitable, innovative companies again. Their current problems are their own fault, created by longstanding mismanagement, not the global economic collapse. Propped up by a bailout, they will simply keep slumping along until a new problem finally brings them down.

Throwing money at the auto industry will not fix it. Congress's request for a plan before making a final decision on the bailout is better than nothing; at least it shows some regard for taxpayers' money. But how likely is it that the automakers will design a plan that voluntarily provides the radical changes needed for the industry? Government coddling will never force the automakers to reorganize themselves; only the need to survive in a competitive economy will.

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