Bailout fever in Detroit
AFTER WASHINGTON decided to bail out big financial institutions, other troubled corporations were bound to look for help, too. The auto industry got in line quickly, and has already been promised $25 billion in loans for retooling to produce more fuel-efficient models. Now, as General Motors and Chrysler consider a merger, the firms' executives are hinting at another $10 billion in federal help to speed such a deal along. In return, taxpayers could take a share in the combined company.
Preserving US manufacturing jobs is a vital goal. But it is hardly clear that this latest bailout proposal is in taxpayers' long-term interest - or in the auto industry's.
Despite its complexity and its jaw-dropping $700 billion price tag, the Wall Street bailout was intended to address a single problem: a worldwide credit freeze-up set off by the failure of subprime mortgages in the United States.
Most of Detroit's problems are more intractable. Automakers are hobbled by costly labor contracts, the potential for conflict with their own dealerships, and a history of relying on gas-guzzlers. A merger of GM and Chrysler would not fix these problems. And federal backing for such a deal risks entrenching the status quo.
In fact, Washington could do much to make Detroit more competitive. Many potential health reforms, for instance, would ease the burden on large employers like automakers. Perhaps GM and Chrysler can't count on such an overhaul quickly. Then again, who would have imagined a $700 billion bailout just a few months ago?
Congress and the next president will have the chance - and may be forced - to address structural problems in the economy. Pumping more federal money into Detroit is a temporary solution at best. 