Hat in hand the U.S. Auto Industry lined up for their slice of government aid and it appears as of this posting that they will get the money they are asking for. These titans spent years hiding behind the “free market” shibboleth when convenient (the market wants gas guzzling SUV’s) and when punished by that same market we hear that they are victims of factors outside their control and that they are “too big to fail.” It has become a hackneyed expression precisely because it summarizes the situation so well; this is the privatization of profit and the socialization of loss.
The very concept of “Too Big To Fail” points to a deeper truth: the U.S.’s auto industry does not operate within the “free market” at all. Far from it. As their moniker suggests, the “Big Three” are an oligopoly with a long record of eschewing innovation (electric cars, hybrids etc.), killing off alternatives like mass transit and bullying public policy (lobbying against CAFÉ standards, environmental and tax policies [Hummer owners get a $34K tax credit!], the threat of relocating factories etc.) all in an effort to conform the not so “free market” to its lumbering non-strategies of pursuing short-term profit.
Now that their short-term thinking has met with long-term reality we are faced with bailing them out. Fair enough. There are millions of jobs connected to the automobile industry. But do we now trust these same institutions to deliver and execute the plan for a sustainable U.S. transportation industry?
If these are the flaws of the industry, consider their current leadership; The CEOs of these failing behemoths flew in on corporate jets, asked for $25 billion dollars, brought literally not one shred of documentation on what they intended to do differently and couldn’t explain how they arrived at the 25 billion dollar figure in the first place. When asked if they would accept a $1 dollar per year salary (Iacoca style) in exchange responses from GM and Ford ranged from non-committal to sarcastic (“I don’t have a position on that today” – Rick Wagoner of GM, “I think I am OK where I am today.” Ford’s Alan Mulally who earns $22m per year).
Oligopolies like The Big Three thrive on standardization, scale and market manipulation – not innovation. It is precisely their structure, size and leadership DNA that I believe precludes them from any chance of successful innovation. So there is the Catch 22. They may be too big to fail – but they are too big, bloated and corrupt to succeed. If we are the taxpayers funding the bailout, what are the alternatives?