Detroit bailout? Wait, what about free competition? And all this talk about free international trade?


November 14, 2008.

The US automakers asked the US government to provide them with a $ 25 Billion bailout. Well, the executives said it’s not a bailout, it’s a loan, to allow the US automakers some breathing space to innovate.

Hogwash. Sorry Obama, I support you for the US presidency, but if the US automakers cannot compete in the commercial world, then they do not deserve to live in the commercial world. Man, i’m kinda confused why the Japanese, Chinese, Indian, and Indonesian trade secretary hasn’t scream bloody unfair competition on the detroit bailout.

The US trade department has been asking, bullying, and threatening other countries to shun “unfair industry and trade practices” as in government support, tariffs, non-tariff bariers, dumping, etc. But now, the US government is considering to do a much gross and blatant protectionism for their automakers, whom by the way, is at their own fault for being unresponsive to changes in the market.

Just imagine if the Japanese government decide to provide a $ 25 Bn loan to Toyota, at Japanese interest rates. This will allow Toyota to corner any market with cheap financing, effectively destroying the competitors in the targeted market. Would you say such support from a government to a private company is fair?

“But well, the US case is different, they need the money to breathe”. So what are we saying here? that the US automakers is weaker than the Japanese automakers? If the Japanese automakers can sell their product, can pay their employees, AND launch innovative product that respond to the market, what should US automakers be any different?

Think about this for a while. The technology for automobile is there, there’s many suppliers that can provide the car components at competitive price. Steel and other materials are available to all industry at market price. These resources are available to all market players, it’s a level playing field, then why does the US automakers keep lurching toward bankruptcy while the Japanese automakers thrive?

I believe it’s because the US automakers management are not as good as their Japanese counterparts. Not as good in managing cash. Not as good in managing employee, dealer, and supplier relation. Not as good in navigating the market. If the answer is “yes, the US automaker are simply not as good as their Japanese counterparts in managing their business” then why should the US automakers be allowed a breathing space?

The auto industry is a commercial industry, not a dinosaur preservation. If the company that plays in that industry cannot compete, then they should leave. Should the US provide such bailout to the automakers, it will give give legitimate right for other countries to refuse US objection on protectionism and set a precedence to other countries on providing government money to private companies in their country.

This level of government support reminds me of the Soviet Union. Look at what happened to them.


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