5:27 pm - Wed, Nov 19, 2008

Big 3 Bailout, er, Failout

Great post, but I disagree on three points:

1) It is abundantly clear that it is not an auto industry problem, but an American auto maker problem.

2) It is accepted that fuel efficiency and alternative fuels would not equate to corporate solvency since the cars are more expensive, not less. On the contrary, the only way to encourage sales would be via significant and extended tax credits to buyers - more wealth redistribution. Going green will only be profitable when it is cheaper.

3) The real issue with American auto industry is due to the legacy defined benefit pension plans. If they go into bankruptcy, they could actually get some leeway to renegotiate with the unions on the pension details. This is a gigantic albatross that has hindered growth over the past 20-30 years that the foreign auto manufacturers have not had to contend with.