Do U.S. carmakers deserve a break?

last updated 8 January 2015

Pity the poor Americans, said Jeremy Warner in Britain’s Independent. Their auto industry is now in the same fix that Britain’s was 30 years ago. Detroit’s Big Three companies “pay themselves too much, they’ve failed to modernize, and they no longer produce the sort of cars that anyone wants to buy.” Predictably, the U.S. intends to try the same rescue technique that we did—handing out cash. Of course, it won’t be enough. “By March, General Motors and Chrysler will be back with the begging bowl, by which time they will have been joined in the queue of destitutes by Ford.” And then more money will be offered. In Britain, “huge amounts of taxpayers’ money were spent propping up this dying industry,” with “very little to show for it by the end.” Rather than endure the “slow death by a thousand cuts” that British carmakers suffered, the U.S. auto industry would do better to file for bankruptcy and restructure. That is the only possible “long-term solution.”

It’s not that simple, said Quentin Willson in Britain’s Sunday Mirror. U.S. automakers did themselves in with “lousy management, kowtowing to unions, too many big-drinking trucks and SUVs, and an arrogant contempt for small cars and green technology.” Yet even though they “don’t really deserve to be saved,” they must be. Allowing them to go into bankruptcy would not only have a “seismic” effect on the U.S. economy, it would also hurt Europe. While waiting for the car companies to recover, the auto manufacturers’ suppliers would fail—and European carmakers are dependent on some of those same suppliers.

Germany is directly affected by the U.S. auto industry turmoil, said Germany’s Der Tagesspiegel in an editorial. General Motors’ European arm makes Opel in Germany (as well as Vauxhall in the U.K. and Saab in Sweden). Unlike the rest of GM’s branches, Opel is an “innovator” that “actually makes efficient cars.” Yet because of the American auto crisis, GM Europe cannot guarantee financing of its operations, and the global credit crunch prevents Opel from getting loans on the free market. Germany may be tempted to “thrust reponsibility for Opel on the Detroit auto barons, after the motto, ‘You pay for your own mistakes.’” But we can’t do that, because 75,000 German jobs and hundreds of small supplier companies are dependent on Opel’s continued health. Whether the Americans bail out their auto industry or not, Germany will have to step in with loans to Opel. We can only hope that if GM goes under, the little European company can make it on its own.