The chief executives of Detroit's Big Three -- General Motors, Chrysler and Ford -- appeared before Congress last month to ask for a government loan to hold off potential bankruptcies.
Many senators and representatives opposed the auto bailout. Some did so out of principle, feeling that the government should not intervene in the free market. These critics of the proposed move pointed to the recent success of the steel and airline industries as proof that companies can survive post-bankruptcy reorganization. Each industry, however, is unique. Unlike airline flights and steel purchases, car sales include guarantees of repairs and spare parts. Consumers are understandably hesitant to purchase a car from a company that may not exist in the future.
Others declined to back the bailout because of the incompetence of the industry, arguing that many of the Detroit auto makers' problems could have been prevented. Instead of spending millions to lobby Congress to block improved fuel-efficiency standards, opponents of the bailout said, the companies should have been developing more fuel-efficient cars.
Rather than focusing on solutions to the domestic auto industry, Congress decided to loudly and publicly scold auto executives for their industry's performance. While the executives certainly deserved the harsh words, America and its auto workers need concrete policies.
This time, the auto executives have done their homework. Ford and General Motors sold the corporate jets in which their chief executives flew to Congress last month. Both companies' CEOs have also agreed to work for $1 a year in exchange for federal funds. Corporate jets and CEO pay, however, are small problems. On that note, GM recently announced attempts to solve major corporate issues. The company is planning to trim the number of dealerships around the country and eliminate much of its bloated workforce.
In a larger move, GM unveiled plans to either sell or close its Saturn, Saab and Hummer brands. We particularly applaud the company for its decision to rid itself of the Hummer brand, long associated with the most egregious gas-guzzling SUVs. GM should be applauded for the courage of its recent decisions; it is never easy for a company to break from its founding vision -- in this case Alfred Sloan's dream that GM would make a "car for every person and every purse." The decision to cut unpopular and polluting brands represents a profound step forward for the company.
Previously, we have supported using some of the financial industry's bailout funds to assist the Big Three. Allowing a crucial segment of American industry to fail would only increase the nation's financial troubles.
The last time the auto executives appeared before Congress, they got berated, but now they are returning to Capitol Hill for help. We hope that this time, Congress will work with the Big Three toward a solution to fix the industry's problems.
