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Robert Reich: The Auto Bailout Is Going Off the Road

May 1, 2009

GM announced [yesterday] it was laying of 21,000 more of its workers, as a means of assurring the Treasury Department the company is worthy of more bailout money. A Treasury official was quoted as saying approvingly that the goal is a “slimmed-down” GM.

What? Having General Motors or Chrysler cut tens of thousands of jobs in order to be eligible for a government bailout reminds me of “saving” Vietnam by bombing it to smithereens. Aren’t we giving these companies billions of taxpayer dollars to save jobs? If not, we’re just transferring money from taxpayers to GM and Chrysler bondholders and shareholders.

I agree with those who say the United States needs an auto industry. But there’s no point spending tens of billions of taxpayer dollars for an auto industry that’s a tiny fragment of what it was before. We could achieve that objective by doing nothing.

Besides, as I’ve said before, the “American auto industry” shouldn’t be defined as auto companies whose headquarters are in the United States. The true “American auto industry” is Americans who make automobiles. At the rate the Big Three are shrinking even as they’re bailed out, foreign automakers with American plants may soon employ more Americans than the Big Three do. The Big Three have gone global anyway. A Pontiac G8 shipped by GM from Australia contains far less American labor than a BMW X5 assembled in the United States. General Motors’ European subsidiaries include Opel and Saab. Ford also has operations around the world. It even owns Volvo.

The purpose of any auto bailout ought to be to help American auto workers keep their jobs, regardless of whether they work for GM or Toyota or anyone else. Or if they lose their jobs, help them get new ones that pay almost as well. Yet we’re doing exactly the opposite: We’re paying GM and Chrysler billions of taxpayer dollars to keep them afloat while they cut tens of thousands of American jobs and slash wages. There’s no good reason why taxpayers should foot any of this bill unless the Big Three agree to keep their workers employed while they try to turn themselves around.

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books (including his most recent, Supercapitalism, which is now out in paperback). Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s “Marketplace” are heard by nearly five million people. This entry appeared on his blog.

Copyright 2009 Robert B. Reich

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