Don’t bail out US automakers

General Motors proposes that the public lend it some dozens of billions of dollars more, and Obama seems to think it’s a good idea. Sad to see the new guy pooch a big decision so early.

Detroit is certainly hurting, and the people who live there and near other plants deserve help, perhaps with bus tickets. But these companies have amply demonstrated that their management is pretty good at making twentieth century cars in a protected environment, but profoundly suck at everything since except, well, sucking up taxpayer money and destroying value. Why in the world would one prop up such an enterprise; if it’s a loan, why would one expect it to ever be paid back? We will wind up with a nationalized car manufacturer, and if you like Alitalia, you’ll love US National Motors, a basket case for the ages.

Protecting an enterprise from its deep-seated inability to produce competitively and to engage with the future has never done anything but put off the inevitable, and very expensively. Toyota and Honda (or a competent new team with tough investors), will be happy to recycle the capital of GM into a working car company like their existing US operations. Or into scrap, as reality indicates. The workers need to be taken care of humanely, as their employer has not, trashing their retirement and medical insurance, but they don’t need to be made permanent charity cases, who pretend to create value in a government sheltered workhouse whose every day of operation is a mendacious pretense that the real losses haven’t already occured. They have: US car companies misused and wasted the resources society entrusted them with and what’s left is a negative sum. The recovery will proceed much more successfully if we don’t start by lying to ourselves, never mind wasting money pounding the chests of corpses.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.