Thursday, November 13, 2008

Collapse of the American auto industry may not be the worst possible thing

I wonder if the otherwise sensible Congressman Barney Frank is speaking out of genuine concern or out of political correctness. I quote from today's news: Worldwide: "A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened,'' [Barney] Frank, a Massachusetts Democrat, said in an interview on Bloomberg Television."

Here's the thing: The fact that the American automotive industry is headed off a cliff -- a long, bumpy journey down a steep hill, followed by a recent sudden drop off a sheer precipice -- does not herald the end of the automotive industry as a whole. The fact of the matter is that many other automakers remain profitable and successful, albeit to a lesser degree during our current recession. Many of those automakers even continue to manufacturer vehicles in the United States.

So what's the problem? It's threefold.
1. The American auto industry is a revered institution.
2. The American auto worker is also a revered institution.
3. There is a pronounced trickle-down effect, should the industry collapse.

I've listed these problems in the politically significant order of precedence. However, only the third problem should carry weight in the government's decision to bail out (or not to bail out) GM, Ford and Chrysler. As for the first problem, well, so be it. These manufacturers have refused to read the writing on the wall regarding our oil-dependence and have continued to throw all of their money into building muscle cars for the muscle heads that insist on driving them. They've been catering to consumer demands without paying attention to market fundamentals. Nissan's been paying attention. Honda's been paying attention. Even Hundai gets what the "Big 3" don't. What we want and what we can afford are two different things.

And the second problem -- the auto workers. I have an idea. Why doesn't the government throw incentives at the successful auto manufacturers? The ones from Japan and Germany and Korea who have set up shop in the U.S. and are now employing American workers to build foreign cars. Why not incentivize them to expand operations? Why not subsidize auto workers to relocate from Detroit to Alabama and Ketucky, to the automotive jobs at companies that actually doing well and make good products and can stabilize their American operations with operations abroad?

One reason: It would be politically incorrect.