- The Washington Times - Friday, December 18, 2009

ANALYSIS/OPINION:

Just as critics feared, President Obama and congressional Democrats are using the auto industry bailout to micromanage the supposed beneficiaries straight into the ground. Mr. Obama is poised to bring the reorganization of General Motors Corp. and the Chrysler Group to a standstill so a federal arbitrator can approve each decision to close a local auto dealership.

GM and Chrysler are trying to trim back their bloated networks by axing more than 2,000 dealerships nationwide, which is widely regarded as a critical move for the domestic automakers’ financial restructuring and long-term viability. The new speed bump, contained in a $1.1 trillion omnibus spending bill signed into law Wednesday, is intended to protect local jobs, but it won’t. By slowing the already overdue restructuring of automakers, the law will only ensure that billions of taxpayer dollars are wasted and even more jobs ultimately lost.

The destructive idea, now embraced by Democrats and some Republican lawmakers who should know better, came from the National Automobile Dealers Association. Constructed to protect local dealers - many heavy campaign contributors - the NADA plan puts short-term local business issues ahead of a long-term plan for saving the two recently bankrupt companies.

Bloated dealer networks have long been a drag on domestic automakers’ bottom line, placing them at a disadvantage to competitors like Toyota, which captured American auto market share with smaller, more efficient dealer networks. With U.S. auto sales down to less than 10 million a year from a 2005 high of 17 million, forcing GM and Chrysler to keep and supply extraneous dealerships makes no sense. Moreover, it hurts successful dealerships that might survive by siphoning away potential customers to small dealerships that lose money. Dragging out the process may even mean that more dealerships will need to close.

The lack of economic foresight and national perspective from Congress should come as no surprise. Lawmakers and the Obama administration have inserted themselves into the firms’ restructuring by lobbying to save plants in their home states as well as mandating what sort of cars Government Motors will build and the location of plants to build them.

It’s not just Democrats playing dilettante car maker. Rep. Steven C. LaTourette, Ohio Republican, inserted the initial arbitration language into the House version of the bill.

Having American taxpayers front tens of billions of dollars to prop up domestic automakers was promoted as a reprieve, a chance for them to make the changes needed to ensure profitability and their survival while protecting American jobs. That was never going to work very well. The two auto giants, their workers - and the taxpayers - would have been better off without the bailout. All the federal dollars have done is slow down the process of needed change, both by slashing the incentive for executives and union leaders to abandon old destructive habits and by adding new restrictions to the companies’ freedom to adapt as they see fit.

For the opposite lesson, look at Ford Motor Co., which refused a government bailout. Ford posted a billion-dollar profit last quarter, and the blue oval’s market share is steadily increasing.

Market forces be damned. All the latest rules will do is allow preening congressmen to pose as defenders of local auto jobs while actually assuring those jobs disappear even faster.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide