GM Fiction & Scare Tactics

You can visit supposedly to get some facts about why GM ought to be given billions of your tax dollars. You’ll find, however, that the site contains more fiction than fact, and most of that fiction is centered around doomsday-scenario scare-tactics.

In the video below, GM claims that allowing the Big Three auto makers&Mdash;GM, Ford, and Chrysler—to fail would result in wholesale economic catastrophe. Of course, this is pure fiction.

If GM really believes in this economic analysis, it illustrates the wrong-headed thinking that got the Big Three where they are today. This analysis is one that believes our economy is static—that it’s a machine with a set number of parts that never change. Of course, this couldn’t be farther from the truth. America’s strength comes from its dynamic, changing economy. GM and the other auto manufactures have been unable to adapt to those changes while others have.

Were GM or any of the Big Three auto makes to fail, the system would adapt. Successful firms that already have manufacturing plants here in the US, like Toyota or Honda, would buy up pieces of a bankrupted auto giant. Private equity could snap up portions of any of these firms just as Chrysler recently went private. Some plants would close, but demand for automobiles would stay the same, so they’d have to come from somewhere. New plants would be built and autoworkers could find jobs there as well.

Suppliers would still be able to sell to the auto industry. Similarly, dealers would still have cars to sell. The industry would look very different, but it would also be a healthier one, having gone through the restructuring needed for it to remain healthy in the long-term.

Right now, the auto industry is a money pit. We can pour more money in, but that won’t solve its problems. Sometimes companies simply have to fail. The pieces will be bought up by healthier companies and America will carry on as a healthier economy.

If we allows ourselves to believe that we should dump $25 billion into an auto-bailout, we’re just postponing the inevitable. Then, however, we’ll be $25 billion poorer and the floundering auto industry will be in even worse shape.