The Nationalization Of The Auto Industry Is Underway

As predicted, we're now seeing plenty of indication that the government intends to take over the auto industry.  First, let's start with some good news:

"We don't want government to run companies," Obama told Tom Brokaw on "Meet the Press." "Generally, government historically hasn't done that very well."

Hey, cool!  Obama agrees with me on something!  There's a first time for everything.

Eh, it didn't last long...

But what Obama went on to describe was a long-term government bailout that would be conditioned on government oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Obama said "actually works, that actually functions."

It all sounds perilously close to a word that no one in Obama's camp wants to be caught uttering: nationalization.

Reality will find the idiots in Washington one way or another:

[I]t is a strategy fraught with risks.

The first, of course, is the one the president-elect himself highlighted. Government's record as a corporate manager is miserable, which is why the world has been on a three-decade-long privatization kick, turning national railroads, national airlines and national defense industries into private companies.

The second risk is that if the effort fails, and the American car companies collapse or are auctioned off in pieces to foreign competitors, taxpayers may lose the billions about to be spent.

And the third risk — one barely discussed so far — is that in trying to save the nation's carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called "national treatment."

Yet so far, there is no talk of offering aid to Toyota, Honda, BMW or the other foreign automakers that have built factories on American soil, employed American workers and managed to make a profit doing so.

The article goes on to talk about the serious ramifications of taking these steps, which ultimately lead to the decline of the free market.  The Wall Street Journal adds this information to the mix:

Under terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government's $700 billion rescue of the financial industry.

Assuming congressional Democrats and the White House come to agreement on the plan, the car industry would be the latest to submit to strict government scrutiny in return for a bailout, joining most prominently the banking sector.

The auto industry would undergo a restructuring process akin to bankruptcy reorganization, only with fewer rigors and with the government, not a judge, in control, and with many associated political complications.

The program would be overseen by an official, tapped by President George W. Bush, whom congressional aides and lawmakers describe as an "auto czar." This person would act as a kind of trustee with authority to bring together labor, management, creditors and parts suppliers to negotiate a restructuring plan. He or she also would be able to review any transaction or contract valued at more than $25 million.

You mean like Paulson is the czar for the banking industry?  Because that's working out so well, you know.  The parasitic unions are refusing to give on anything but the surface:

In a sign of how messy the reorganization could become, the United Auto Workers union is seeking to attach strings to any concessions it makes for the Big Three. Marc McQuillen, president of UAW Local 2404 in Charlotte, N.C., said the union is looking for an equity stake in GM and likely a seat on the company's board.

This has got to be the crown jewel in a string of excessively bad ideas from the worst Congress in history.

One of my commenters offered a suggestion that actually makes some sense.  ppwa suggested this:

Please consider this option for the auto bailout. This will make Congress look like heroes to the American taxpayers and help the auto manufactures.

The auto manufactures would be able to sell 2.5 million vehicles which would keep people employed and the taxpayers would get a benefit from the bailout money which came out of their paid in taxes.

Instead of just giving the auto manufactures $34 billion dollars for a bailout, give each person who filed an income tax last year and made less than $100,000.00, a government voucher for $20,000.00 to be used toward the purchase of a new American made vehicle.

I'm not sure exactly how many people would fall in this category but the figures could be adjusted. Vouchers could be only good for the original holder and the car dealers would have to verify with the federal government that the voucher presented to them was truly sent to the person trying to use it and the vehicle would be titled in that name.

The $20,000.00 cap would keep sales targeted toward the smaller, more energy efficient models.

It is a win-win situation.

Personally, I don't think anything should be done.  But, if we must do something, then this seems to be just about the best idea I've seen yet because it incents people via the free market.

The point is that we need to get those slimy government tentacles out of things as much as possible.  They screw up everything they touch, making things more expensive and lower quality, so it is beyond reason why we are now handing over so many industries to them.  Once again, look at the airline industry - almost every major airline has gone through bankruptcy since 9/11, and they're doing just fine now.  The worst are gone, but that was because they were mismanaged, not because the industry tanked.  Many are much leaner and more efficient.  The same can (and should) happen with the auto industry.  To cling to the Big 3 as they currently are is to cling to looming economic disaster, and the more taxpayer money gets thrown into the union-clogged toilet in Detroit, the worse that disaster is going to be when it hits.

In the words of Obi-Wan Kenobi to Luke Skywalker at the moment of truth in the Death Star trench:

"Let go..."

There's my two cents.


Sources:
http://www.iht.com/articles/2008/12/09/business/09nationalize.php?page=2
http://online.wsj.com/article/SB122875608562688401.html