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November 12, 2008

Saving US Auto Manufacturing

If people don't buy cars, there is no amount of bailout that will save the millions of US jobs in and related to car manufacturing. If they're not making cars, the manufacturers won't recall workers or order from their suppliers. It's as simple as that.

But there's a pretty simple solution as well. The US government should order a complete replacement for its vehicle fleet to be delivered over the next four years. The new vehicles must be either plugin electric hybrid, pure electric, or possibly natural gas. Obviously retooling both at the manufacturers and suppliers is required to deliver this order so the government should be willing to prepay a significant part of it as it does for new weapons systems. That gets money into the system fast and creates/saves jobs almost immediately. It lets the suppliers retool as well as the final assemblers.

Ideally all auto companies ought to be able to bid. Maybe we only offer prepayment when there is a certain percentage American content although I hate be even that protectionist. Certainly the companies with Japanese names that build cars using American labor in the US ought to be on an equal footing with Detroit. American jobs are American jobs whether unionized or not.

Some infrastructure money needs to go into recharging stations. Good project to be doing as well. Also the electric grid needs work.

The objective is not to assure that no auto company goes bankrupt; the objective IS to keep Americans working on making America a better place. The manufacturers and their suppliers that win the bids to supply the US government with a green, fuel-efficient fleet, will then be well-positioned and retooled so that they can sell these products to the rest of us and the rest of the world once we start buying cars again.

If we simply shovel money into the weakest companies like Chrysler and GM, we'll have to also bail out relatively strong Ford to keep it from being disadvantaged. If we subsidize our car industry, the rest of the world will respond with competitive subsidies. The net effect will be something less than zero, especially if no one is buying cars. But, if the rest of the governments emulate us and order new green fleets for themselves, the world'll be a better place.

Yes We Can is a debate over whether Americans can build cars to meet this goal is here.

A related post suggesting the government put money in the bottom of the car market by buying and junking cars over 10 years is here.



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