Why the Auto Industry

The government is going to give auto industry parts suppliers 5 billion dollars. ( http://www.bloomberg.com/apps/news?pid=20601087&sid=a4WnIZRxLwlU&refer=home) I remember the days when 5 billion was considered a lot of money. Today it feels like chump change (side note: Do you still pick up pennies when you drop them?)

The auto industry as a whole enjoyed decades as the only kids on the block. At the time they actually made better cars than the rest of the world and America's appetite for them was insatiable. Bigger, badder, more horsepower and flair; that's what we wanted. The big auto companies made huge profits and they were nice enough to share it with the hard working Americans that worked in their plants. They agreed to huge compensation and retirement packages and everyone was happy.

Unfortunately that little thing called globalization caught up to them. Trade barriers were removed, transportation costs dropped and Japan, Korea and others started to make reliable, attractive cars we wanted to buy. Instead of cutting expenses the American auto makers ignored the problem. Profits were down yet costs remained high. Seems like business 101 to me. American unionized auto workers make more than equally skilled non-unionized workers at foreign car plants IN AMEICA. It's not like I am comparing their wages to people in India or China. These workers are all American and have equal skill sets yet one makes more, huh? That doesn't make sense.

I don't want to sound like a grinch and say that we should let them all fail. What i want them to do is admit their mistakes and crush the unions. Let's make the American auto industry cost competitive with the rest of the world. The union contracts need to be dismantled and the only way i see it happening is through bankruptcy. If we allow the auto industry to continue to pay above the market wage for it's employees we, the American taxpayers will have to bail them out every couple years (or months).

I originally wanted to write about why politicians are so keen on saving the auto industry. Why not give the newspaper industry or consumer electronics industry (Circuit City) huge sums of money. I mean, they are also poorly run, don't they deserve some cash? But then i realized it was all probably related. What I believe got the auto industry into this mess, the Unions, probably has a strong lobby group in Washington. They can effectively threaten Washington with fears of double digit unemployment.