Every day there is something new about the economic crisis. Right now, all the buzz is about the proposed stimulus plan. Nonetheless, the three-headed monster that is the major three US automakers will undoubtadly come back in the next few months asking Congress for more money.

The Bush administration gave Chrysler and GM a small loan to get them through the next few months and to let this Congress and the Obama administration deal with the problem in full detail. The same basic arguments will be brought up: the economy is too fragile to let the US automakers collapse, the government shouldn’t prop up a dying business, the automakers will fail eventually so any loan is throwing good money after bad, if the government will give the automakers money then the government should be able to pursue goals like fuel efficiency, etc. Here are a few of my thoughts:

1.  Given Congress is prepared to spend almost a trillion dollars on random government projects, it would make sense to continue an actual business, that is the US automakers, rather than use whatever money they would loan the US automakers on some pork project like building a bridge to nowhere. While the unions and the legacy health care costs have made the US automakers inefficient compared to say, Toyota and Honda, spending money on them is still more efficient than spending government money on something random like a bridge or giving every kindergartener a laptop. The cost of propping up the automakers is far less, in terms of efficiency and raw dollars, than the cost of replacing GDP and job lost by letting them go under.

2. Long-term, the unions need to make concessions. If the underlying business is constantly on the brink of failure because of some misguided concessions union members won 20 years ago, they need to give up those benefits in order to let the business thrive. The government can’t continue bailing out the Big Three forever. For now, that is fine. But the UAW’s control must be squashed if union members want to have any jobs at all.

3. Excessive demands on the part of Congress for hybrids and super green cars is ridiculous. If no one is going to buy them, then the government is just making the Big Three more inefficient, which means the Big Three will have to come back to the government again in the future for more money since they built a bunch of hybrids that no one wanted to buy.

The pessimist in me can’t help but think the US automakers will soon become a governmentally quasi-controlled companies. At first, this is because of their own stupidity in dealing with the unions. Then it will be because of the hybrid bubble they were forced into. Whatever the case is, it’s still better than letting them outright fail.

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