Virg Bernero and I don't exactly see eye to eye.
Bernero, the mayor of Lansing, Mich., is obviously in favor of a bailout for the auto industry because his town will be greatly impacted. But like many of those in favor of the car companies getting federal aid, his argument for assistance centers around the idea that if banks and financial institutions got bailed out, why shouldn't the carmakers?
He made this point during a
segment on which we both appeared Wednesday. While I tried to counter that the banks haven't been bailed out as much as they've been bought out, Bernero wasn't necessarily inclined to let me give my side of the argument.
So here goes. Yes, the
purchased preferred stock and warrants in several institutions. True, the banks received some loans. But the reason these things have happened is because those entities have a proven track record of making money and only a short but disastrous year of losses.
On Thursday, I wrote a longer piece about the problems with the proposed auto
. I received plenty of feedback, and some of it was negative. With that being the case, I wanted to give a few readers a chance to offer their own perspective.
One person wrote me a note saying that if the automakers go down, so will the parts suppliers and many small businesses. The media, this person wrote, have yet to clearly explain the various sectors that would be hurt by the collapse of the U.S. auto industry. Even journalists will suffer, because failed businesses will mean fewer buyers of ad space, leading to layoffs in the news field, the writer said.
Here's my response.
is dealing with a net cash shortfall, and the company will likely struggle for a long time to return to profitability. GM knows this, and the company is on Capitol Hill this week in a bid to get $18 billion in aid from the government.
So I reported the truth. Second, it is true that many journalists are getting laid off these days, but the news continues and reporters remain there to report it. That isn't going to change, even if the number of people in the media business does shrink.
Another reader offered this: "You make some great arguments for not bailing out the automakers in this country, but fail to address the really big issue of whether the U.S. needs big manufacturing business here, on our shores, and if so, whether we should subsidize our industry as foreign countries do. As long as it is not a level playing field, you cannot blame the automakers for not being as profitable as they should be."
To which I say manufacturing goes where labor is cheap. Because of union contracts, workers at GM and
are much more expensive than those at some of their foreign rivals, even when those foreign carmakers have plants in the U.S. It is true that other countries subsidize some of their industries, but isn't the U.S. built on the notions of free trade and capitalism?
If we extend help to GM, Ford and
, are we being fair to the German and Japanese automakers who have built plants in this country and given many of our fellow citizens jobs?
Another reader said easy trade was at least part of the problem, arguing that North American governments have allowed foreign manufacturers to sell cars here to their hearts' content, while these same competitors make it harder for U.S. car companies to sell abroad. Letting the auto companies go out of business would mean that the U.S. "would be very close if not into a depression with the millions of jobs that would be lost," the writer contended.
Consider this: GM is building a $200 million engine plant in Brazil and a $300 million assembly plant in Russia. So even though the U.S. makers might not be in Japan, they are elsewhere around the globe. And if the U.S. goes into a depression, it won't be just because of the automakers. It will be because of the multifaceted financial crisis that has gripped several industries at once. The auto sector is one, but don't forget about the troubles plaguing housing and banking.
I gave these readers their moment because I know they're not alone in their opinions, and I welcome their comments. So keep those observations coming, and I'll keep reporting the news.