Economics Professor Says Bailout Not the Answer for Auto Makers

Article ID: 546380

Released: 12-Nov-2008 12:00 PM EST

Source Newsroom: Creighton University

  • Creighton University Economics Professor Ernie Goss

Newswise — Creighton University Economics Professor Ernie Goss says a bailout won't help ailing American auto companies General Motors or Chrysler.

Goss says there are 11 auto manufacturers in the United States today, seven more than the country had 40 years ago.

"Thus there should be little support for a bailout for GM or Chrysler. Due to their non-competitive cost structures, GM and Chrysler's long-term economic future is doubtful. A bailout would only delay the inevitable insolvency of both companies and the too-big-to fail mentality is a failed policy." GM

Goss says if the automakers fail, the work will be shifted to their more productive and lower-cost U.S. competitors such as BMW, Mercedes, Hyundai, Honda, Toyota, Nissan, Ford, and Mitsubishi. All of these companies are global in scope, owned in part by U.S. citizens, pay U.S. taxes, employ U.S. workers and have U.S. citizens on their upper-management teams.

"A vital market based economy demands that success be rewarded and failure be punished. In this case, management failed to recognize how dependent company profitability was on large cars and low gasoline prices. Unions failed by pressing for wage and benefit concessions that were greater than the market could bear. The only reason to bailout GM is political. And mixing politics and economics normally results in lousy outcomes," said Goss.


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