Tina K. Russell

November 21, 2008

Market failures

Filed under: Uncategorized — Tags: , , , , , , , , — Tina Russell @ 12:32 pm

UPDATE: The letter-writer responds in a comment below! How cool. Just so you know, people who are addressed, directly or indirectly, in my posts should totally leave a comment, because those comments are awesome.

Letters – Rescuing Detroit – The Great Debate – NYTimes.com
To the Editor:

I agree that letting the Big Three domestic automakers collapse would result in a catastrophic loss of jobs, but find the terms of your proposed bailout counterproductive (editorial, Nov. 15).

Companies as large and complex as automakers simply cannot afford to replace top management in the middle of a crisis. Doing so would also be pointless when the industry’s troubles stem primarily from the temporary spike in oil prices and the continuing financial crisis, not poor management.

After all, the Big Three did not specialize in trucks out of shortsightedness or social irresponsibility, but because that is what the market demanded.

Pah! I found that statement amazing. The trouble isn’t that they were following the market’s demands; the trouble is that they thought, arrogantly, that those demands would last forever. And, when the market stopped demanding SUVs and trucks the size of small moons, the automakers didn’t notice. Now they’re on the brink of collapse, and they want us to bail them out.

Forcing automakers that accept a bailout to produce only micro cars that get 50 miles per gallon would deprive Americans of the larger, sportier vehicles they prefer, while placing the rescued automakers at a competitive disadvantage when gas is cheap.

Oh, my Lord! Has this person seen an SUV dealership, lately? There’s one near my apartment, and its signs now shout loudly, “Fuel-efficient cars here!” (or somesuch) and hope the message is loud enough that you don’t notice row after row of gas-guzzling tanks. The SUV market is a disaster; nobody wants to buy a heavy car in this market. I give that SUV dealership six months, tops.

This brings me to the really depressing part of the bailout, and the whole act of legislating more fuel-efficient cars: it’s a failure of the market. No, not us; we want more fuel-efficient cars, we buy more fuel-efficient cars, and it just so happens that they’re made by foreign automakers (which, by the way, often have factories in the US). In a just world, in a world where the CEOs of the Big Three car companies had more than half a brain, we wouldn’t need fuel-efficiency standards; companies would simply compete on fuel efficiency until America produced cars that ran on little or—get this—no gasoline at all. It’s in vogue; everyone would want to buy a Chevrolet or a GM hybrid. It just so happens that they missed the boat; well, more accurately, they missed the boat, denied there was a boat, and are lobbying the government for their right to continue failing.

That’s the depressing part: we have to legislate that these companies make cars that people will buy. We have to demand that Detroit’s car magnates make money. Why are they so arrogant? Why not jump on the fuel-efficiency bandwagon when there’s so much money in it? I can only imagine it’s sheer obstinance, and if the jobs provided by these car companies are important enough for the government to step in and help the company out, they’re important enough for the government to step in, change the rules, and fire the management.

The federal government must help the Big Three weather the current financial crisis; they are truly too big to fail. But such assistance should not be used as an excuse to dictate the types of cars that Americans can drive.

Karl von Schriltz

Washington, Nov. 15, 2008

Ha! More like we have to force the automakers to make the cars Americans want.

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