The auto industry was losing money during the economic boom, a sure sign of profound problems. The fundamental problem with the industry has been the restrictions the government has imposed on it, including forcing it to build unprofitable cars that Americans don't want to buy: smaller, more fuel efficient cars made in UAW-manned factories.
The fuel efficiency standards were bad enough, since it meant consumers had to be induced with low prices to buy cars they didn't prefer. But the government also mandated that such cars had to be made in domestic factories, since cars made overseas and imported into the U.S. didn't count to meeting the fuel efficiency standards - a clear payoff to the UAW.
Other damaging government restrictions include labor relations law, which gives the UAW disproportionate leverage vs the auto makers, and the new quest to force the Big Three to make unprofitable, environmentally "friendly" cars.
So now the industry has massive excess capacity: too many factories, dealers, brands, and employees. Normally, excess capacity leads to aggressive plant closures, moving production overseas, M&A deals, and if those aren't sufficient, bankruptcy.
But the UAW preferential negotiating position has prevented the Big Three from taking normal business steps to eliminate this excess capacity.
So now we are left with Chrysler being forced into bankruptcy.
In a bankruptcy untainted by government pressure or money, Fiat would be allowed to bid for those assets that it wants, which would allow many of Chrysler's plants and brands to survive. So many of Chrysler's assets would survive and some jobs - but the above-market UAW retiree health benefits and above-market UAW wage levels would suffer.
Instead, Obama is throwing another $8 billion down the sinkhole of Chrysler to preserve UAW benefits and jobs. The UAW is a reliable Democratic ally, providing money and manpower to help elect Democrats.
Other damaging government restrictions include labor relations law, which gives the UAW disproportionate leverage vs the auto makers, and the new quest to force the Big Three to make unprofitable, environmentally "friendly" cars.
So now the industry has massive excess capacity: too many factories, dealers, brands, and employees. Normally, excess capacity leads to aggressive plant closures, moving production overseas, M&A deals, and if those aren't sufficient, bankruptcy.
But the UAW preferential negotiating position has prevented the Big Three from taking normal business steps to eliminate this excess capacity.
So now we are left with Chrysler being forced into bankruptcy.
In a bankruptcy untainted by government pressure or money, Fiat would be allowed to bid for those assets that it wants, which would allow many of Chrysler's plants and brands to survive. So many of Chrysler's assets would survive and some jobs - but the above-market UAW retiree health benefits and above-market UAW wage levels would suffer.
Instead, Obama is throwing another $8 billion down the sinkhole of Chrysler to preserve UAW benefits and jobs. The UAW is a reliable Democratic ally, providing money and manpower to help elect Democrats.
So your money is being spent by a Democratic president to help his allies elect Democrats. This is the result of government intervention in the market.
None of this would have happened if the government had allowed the free market to operate in the auto industry.
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