On bailing out the auto industry
So, there is a lot of talk lately about bailing out the US auto industry. I can't say I have a firm, well formulated, reasoned position on this subject, but I do have some thoughts.

As a free market loving, libertarian leaning, government fearing guy, I think a bailout is completely wrong headed. After all, if private industry can't survive on its own, then no amount of governmental propping won't really help, but merely delays the inevitable. I don't have a 'buy American' bent, though I own and have owned a number of domestic cars. And, in a sense, the whole concept of a 'domestic' auto industry is rather archaic -- carmakers are multi-national corporations, doing business throughout the world, and it is hard to say what constitutes a 'domestic' car anymore.

BUT

I would be incredibly sad to see the big three fail and disappear. It isn't that they produce many (any?) of my true 'dream cars' (well, except for the Chevy suburban, and that isn't much of a dream...) But I don't think the big three are as screwed up as the naysayers like to say, especially because there are economic externalities which have rendered the big three uncompetitive through no direct fault of their own (though I think they contributed to keeping some of these in place...). Chief among these externalities is cheap gas -- we've had unreasonably cheap fuel in the US for far too long, ignoring a few brief price blips ('73, '78, '07 come to mind) and it has caused Joe Average to believe that it is his God given right to drive a Hummer or a Dodge Charger when a more economical alternative would have been perfectly serviceable. (artificial in the sense that the fuel industry has not been taxed in accordance with the burdens imposed on the country by it -- wars in the middle east, significant dimplomatic efforts to keep prices down, etc...)

It also permitted the domestics to ignore fuel economy as a design concern almost entirely, other than paltry lip service to CAFE requirements. This brings up another externality: CAFE. before people say the free market doesn't work, consider whether government regulation does either? Has CAFE done ANYTHING to cause the domestic manufacturers to commit to more fuel efficiency? No. It created a situation where manufacturers worked around the regulations by producing light trucks (exempt from CAFE) as passenger vehicles. And before you say "fine, close the loophole" consider what you're saying: By including light trucks in CAFE requirements, are you likely to create a situation where GM and Ford (if they survive) will just create heavy passenger trucks, so large families and other people who want and/or need space, power and luxury will just buy even larger, heavier and less efficient vehicles? I think it is likely. And consider what increasing the price of fuel even for a short time did: the fuel economy ratings for newer large vehicles are, in reality, improving, even while the testing regimen is (theoretically) making the tests more stringent and realistic. In fact, the Chevy Tahoe (not Hybrid) has a better fuel economy rating than the japanese competition (Sequoia and Armada). This tends to indicate that the automakers respond to the market -- attempting to keep their products competitive and relevant. And we see indications that American people can and do make relatively rational purchasing decisions, as long as the marketplace isn't skewed by artificial forces.

Does this mean I think the car companies don't deserve the beating they're taking? No, not really. They failed to prepare for changed times and acknowledge that cheap gas would come to an end. They have failed to produce a full range of quality vehicles and have failed to use their technological prowess to improve efficiency even when efficiency wasn't selling cars here. Sadly, they have decent products in the European market which do meet these requirements, but they aren't considered suitable for the US (and Canadian) markets. However, I think this situation is most solidly connected to another externality: International Trade restrictions. US auto makers have long pursued a completely bifurcated strategy -- Domestic vehicles for sale here (and Canada) and world vehicles for sale in Europe and a few other markets. Why? Two reasons. One- The US (and Canada?) are somewhat unique transportation problems -- vast distances, sprawl, and lousy public / mass transit. The strength of cheap(ish) air travel killed the mid distance train industry, I think, and the growth patterns didn't favor its development anyway. Sure, here on the Mid-Atlantic/ North-Eastern seaboard, we have tolerable train service, but try to get from say, Nashville - whoops, no Amtrak service at all, from a major US city! Memphis TN to, say, New Orleans, LA by train, and you'll see what I mean. One trip each day -- better hope it accommodates your schedule. Because the growth in this country really came about after air travel and cars, there was no incentive to improve rail infrastructure. And the aforementioned cheapness of fuel didn't exactly favor long haul bus travel, since it has few advantages over car travel, and many disadvantages. Particularly because domestic cars have been Cheap!

Yes, it is true, I think the domestic manufacturers make cars that fulfill most of the mission requirements of US drivers at a price that most imports can't match. Even the 'cheap' Korean vehicles don't seem to undercut a comparable domestic car when you consider actual selling prices rather than MSRP. Actually, I think the Chevy Aveo undercuts its Korean brethrens' pricing, while being similarly equipped and perhaps more palatable to middle American families (it wears the bowtie, after all, rather than the twisted H). The difference becomes more obvious when you consider larger, more family oriented cars and minivans. Sure, the Japanese minivans are better in many ways than the domestic offerings, but they are also much pricier when you look at the real selling price (and ignore re-sale, etc...)

Anyway, in the end, I'm still not convinced that a government bailout will help, or that it is a good thing even if it would help. But I'm also convinced that the government and the US Taxpayers, as individual car buyers and represented by our government, created the situation that has lead to the likely demise of one, two or all three major US auto makers.