Saturday, 6 December 2008

Auto Industry Bailout: One Simple Question

Given that:

1) The American auto industry is in trouble.

2) A large part of that trouble is derived from their massive healthcare commitments to workers.

3) Our competitors in the auto market (mainly Germany and Japan) do not have these massive obligations, allowing them to make cheaper cars while maintaining a healthy workforce.

4) We are thinking of spending massive amounts of money to bail out the auto manufacturers.

5) However, the currently bailout plan would still leave the massive healthcare burden on our auto manufacturers, maintaining their current competitive disadvantage.


Q) Is there any practical or legal reason why the government could not take over the health obligations of automotive workers immediately as part of the bailout package?

I'm seriously very interested in this as I don't have enough knowledge to know if there's an obvious reason why this wouldn't or couldn't work. However, it seems to me that this is a market-friendly solution - it focuses on equalising the competitive environment rather than artificially fixing the car market. It also seems to be the compassionate solution - relieving auto workers of the immediate burden of concern about their families health care should the bailout fail to save the manufacturers. And finally, it is a practical solution - looking at the specifics of the problem rather than throwing money in to staunch the bleeding.

So, where am I wrong?

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