Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

Auto makers want a bail out

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The news at 6 on CBC tonight conflated these two stories. Autoparts makers say they need help from the Ontario and Canadian governments. And on the other side of the line GM and Chrysler want a $10 billion rescue package.

On boith sides of the border are Conservative administrations who have been advocating policies that favour businesses. That have repeteadly stuck to the line that the private sector is better at predicting markets, serving demands and being more efficient than government. In the case of the North American banks and the automobile business it is now plain that this was not the case. If government departments has made errors on the scale of the credit crunch or the failure to predict the demand for fuel efficient vehicles, there would be outrage and demands for heads on platters. So far, the financial geniuses who brought the world’s financial system to almost complete collapse have actually been rewarded for their efforts. Bankers have been telling their staff that their bonuses are safe. Now the least competent auto makers want some for them too.

The answer, of course, must be “no”. Because what is happening to GM and Chrysler is the judgement of the free market. Customers have looked at what they have been offered and decided that other makers have better products. And it is not as if this outcome had not been predicted. The Big Three have been busily fighting CAFE standards – or working their way around them – for years. They refused to try to meet California emissions standards and preferred to fight them in court. Meanwhile, other more intelligent companies built cars that better meet the needs of a world rapidly running out of cheap oil.

Yes this will be tough on those with jobs at these companies. Just as the collapse of ENRON was tough on their employees. Just as the closure of many small businesses by the onslaught of big box retailers has been disastrous – especially for “small town America” now being so eagerly courted by the Republican Party. There were no bailouts then. Chrysler has been bailed out once before by the US government. Maybe there needs to be a “three strikes and you’re out” clause for people who make bad management decisions.

GM has been working hard for many years to persuade people they needed bigger cars – and especially big trucks – for their personal transportation. Pressed by governments to provide more fuel efficient vehicles they grudgingly produced a car which they said nobody wanted. Meanwhile other, foreign owned makers, found that they could sell all kinds of small cars. GM deserves to go to the wall. It did not make what the market wanted and was slow and ineffective at changing. It has also shown itself to be utterly contemptuous of the people who made their cars, bought their cars and paid taxes used to prop up their business. GM has a long and generally reprehensible history – right back to the times when they shut down successful streetcar and interurban transit companies having bought them up so they had to buy GM buses. They have shown how addled the adage “what is good for GM is good for the USA” has turned out to be. And not just in the wasteland of Flint, Michigan.

If governments are considering making investments in transportation it must be in products that meet future needs better than Hummers. Public transportation, bicycles and walking all need significant support and that can only come from taxes. The auto industry has been innovating – just not the Big Three – and the Canadian government has just got in the way of new products getting to market. Low speed electric vehicles being an obvious solution to many urban journeys and deliveries. Governments have also been disastrously wrong in their support for alternative transportation fuels, which have not delivered anything like the benefits claimed for them.

We do not need to prop up automobile industry. What we need to do is rethink how we are going to face a future post peak oil, and in the face of rising sea levels and other impacts of climate change which are all around us. Keeping the companies going that are largely responsible for the mess we are now in makes no sense at all.

Written by Stephen Rees

October 28, 2008 at 7:51 pm

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