Loan not good idea for U.S. car makers
TEXT OF INTERVIEW
Scott Jagow: Time to visit with our economics correspondent. Chris Farrell. And the topic this week is the auto industry. There’s talk of a loan to help GM and Chrysler complete a merger, or some other direct assistance to American car makers. But Chris, based on the e-mail you sent me, I know you think the government should keep its hands in its pockets this time. Why?
Chris Farrell: Well for one thing, I mean this sounds harsh but if GM and Chrysler disappeared, we’d still be able to buy as a consumer, we’d get cars from Ford, Hyundai, Honda, Toyota. There’s plenty of car makers out there, so the consumer’s not going to get hurt. And secondly, it’s a competitive market. GM and Chrysler have made a lot of strategic mistakes, management has made some terrible decisions. And finally, I mean if you just look at Chrysler, it’s owned by Cerberus Capital Management, it’s a private equity firm. So the American taxpayer is going to bail out a private equity firm?
Jagow: Well, there are a lot of jobs at stake here, Chris.
Farrell: Yes. So my notion is, let’s not give the money to Chrysler and GM and the management. Let’s give it to the workers. Now if I do the calculation right and we’re talking about $10 billion, that’s about $70,000 per worker. As a voucher, workers can use it to retrain, workers can use it to move to a different part of the country. And of course some of it might be wasted, but it is a waste of money to put it into the companies themselves. We’ve seen disaster after disaster, whether it’s in the steel industry in the past, where companies have not done what we expect them to the do with the money. What I would prefer is look, go into bankruptcy. We don’t need a taxpayer bailout, so just declare bankruptcy. But if the politics are such that we are going to do some form of bailout, let’s not direct it to the companies. Let’s protect who we’re really worried about, which is the worker.
Jagow: All right, so are you basically saying to give up on the American auto industry?
Farrell: Whoever can survive, survives. Seems like Ford’s going to be around, right? And maybe a smaller GM or a smaller Chrysler, or maybe Chrysler disappears, a small GM — I don’t know how it’s going to shake out. But as far as I know, there’s lots of auto plants here in the U.S., there’s no shortage of cars. We have a lot of auto workers, they just happen to be working for companies with names like Toyota and Hyundai and Honda. Yeah, we’re going to have a shrunken industry, which by the way, has been shrinking. Let the bankruptcy system deal with it.
Jagow: All right, Chris Farrell, our economics correspondent. Thanks.
Farrell: Thanks a lot.
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