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« Reason

Whither Detroit?

By Tyler S. Clark (Contact)


Published November 18, 2008

As the federal government injects billions into financial institutions and indicates its intent to continue down this path, the focus now shifts to the health of the domestic automobile industry. Many are asking whether we should step in and keep them from failing, much as was done for the airline industry after 9/11.

But the question about helping the Big Three is not 'if' but 'how'. The Center for Automotive Research conducted a study on "The Impact on the U.S. Economy of a Major Contraction of the Detroit Three Automakers" (pdf) and determined that--though not the oft-cited statistic by supporters of 1-in-10 jobs--the impact of a contraction in Detroit could result in the loss of up to 3 million jobs in 2009. Furthermore, no more than half of those projected losses would be recoverable through the arrival and expansion of manufacturing by foreign automakers in the U.S.

There is justifiable, wide-spread disillusionment with the unimaginative management of GM and others: they have continued to produce gas guzzlers and resist increases in fuel efficiency while Honda and Toyota have been churning out highly desirable hybrid vehicles for years. Any federal support extended to automakers will and should include stipulations for bringing their production strategies in line with future trends: dictating expansion of hybrid technology implementation and stipulating increases in fuel efficiency.

We cannot afford to let the automakers collapse any more than the financial sector. After all, as has been pointed out, the biggest threat to our economy is consumer confidence. If help for automakers is not issued at all or is issued in a way that lacks accountability for future performance, the crisis of confidence will only deepen.

Some argue that these kinds of rescues merely create a rainbow signal in the sky for other industries to follow to its pot of gold. Fine. Let them come and prove their need in terms of impact to the economy. As for domestic automobile manufacturing, the defense can rest.


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