Let Ford fail [updated]

If the government prints money to bail out banks, then why shouldn't it tax, print and borrow to bailout car-makers?

That's the 'reasoning' of GM, Ford and Chrysler in response to signs that consumers don't want what they're producing: their business model is failing, and in response they're calling for the same bailout crack the banks got.

Talk about moral hazard! Looks like everyone's been getting the right message from the multi-trillion dollar 'rescue' packages: that the US Congress is the ATM machine that can!

And of course the car-makers have friends in the US Congress who are desperate to buy votes show they care. "We've got to do this because the cost of inaction is so high to communities, to workers, to companies, blah, blah, blah, blah, blah, " whined Senator Sherrod Brown on behalf of the would-be welfare recipients.

Baloney. The cost to everyone for propping up a failed business model is enormous -- just ask the British taxpayers who nearly bankrupted themselves propping up the nationalised trade union-dominated coal, car and steel industries for decades.

Fact is, no business is "too big" too fail. The bigger they are, the more important it is that the resources they using aren't being mis-used -- and there's no worse use than producing stuff too few people want to buy at a cost that's more than they want to pay.

There's nothing wrong with bankruptcy -- the real assets don't go away, they're just put to better use. If the capital tied up in the failed business model run by the car-makers can be put to better use by someone else, then a bailout simply slows down the necessary conversion. I'm with Briggs Armstrong on any bailout for these knuckleheads:

The basis of GM's claim is essentially that they are too big or too important to fail due to their massive labor force. But how massive is their labor force relative to other American companies? It may be surprising that the following companies employ a larger number of workers than GM: Target, AT&T, GE, IBM, McDonalds, Citigroup, Kroger, Sears, and Wal-Mart. It is also worth noting that Home Depot, United Technologies, and Verizon all employ nearly as many workers as GM.
The question must be posed: Should the government bail out all 12 of these companies and, if so, at what cost?

No, of course not. But once you start bailing out the goose, then the gander is going to want his pound of flesh as well.

It is unethical to force taxpayers to pay billions of dollars in order to bail out a company with a failing business model. After all, they cannot even claim, as banks did, that it is an industry-wide problem. Because if it were industry-wide, Toyota, Hyundai, Honda, Volkswagen, etc. would all be joining their American counterparts on Capitol Hill with their collective hands out.
For years GM and Ford have produced a product that consumers do not value as much as the product provided by their competitors. Rather than changing their products or business model, they instead spent small fortunes on lobbyists. If the government does bail out GM, rest assured that this will not be the last time. But even if the government gives GM a check every week, there will come a time when no amount of government money will be enough to save them.

Exactly right.

UPDATE: Great comment from LGM:

Now there is only one option [the auto industry sees]: Government's got to do something about it. In a sense they are correct. The government does have to do something. It must get out of the way and stop molesting industry.