What Should be Done with the U.S. Auto Industry?

Let's talk about the potential bail out for the auto industry, which is a very emotional issue to many individuals, especially those individuals tied directly or indirectly to the industry. The argument goes something like this, if the financial sector can be bailed out, why not the same for the auto industry? The answer is that we, as in taxpayers and the Treasury, do not have the financial wherewithal. Congress should not have approved TARP. Also, there is no fix for the so-called big three, or should I say, little three, auto firms in their present form. Period!

Karl Denninger, from the Market Ticker, succinctly states the problem and solution as follows: “We have been operating at a "run rate" for automobile sales of about 17 million units a year. The "no silly credit" number is closer to 11 million units. Notice how you don't see the number of "older, junky" cars on the road you used to? That's the "chicken in every pot" that was silly-credit created.

The UAW has said they will not make any (more) concessions. Yet they have to make concessions, simply put, because the industry needs to shrink by 40% to be viable.
There is only one way out of this mess. That is “Chapter 11”. We must force these firms to downsize to a size that can be sustained. Yes, this will cost jobs. It is going to cost jobs no matter what we do, because we have built an entire industry up around a totally unsustainable demand curve and that which cannot be sustained will not be sustained.

If we try to "bail them out," we are simply throwing money down a rat hole. GM has a negative $60 billion net value right now. Toss in another $25 billion, they still have a negative net value.
GM has been functionally bankrupt for more than a decade; this is not a new problem and both management and labor have refused to solve it for more than 10 years. There is absolutely no reason to believe they will solve, and the best way out there is the transparency that is forced upon a firm via the bankruptcy process.
Chapter 11 allows these firms to submit their labor agreements to the court to have them forcibly renegotiated (without favor to either side) and in addition it forces the pension problem into the PBGC where that is reduced as well.

Next, we need to allow the diesels sold in Europe into the U.S. They can't be sold here due to the Greenie BS. That's stupid; hang the greenies up by their toenails. While we're at it, if the crash standards are good enough for Europe, they're good enough for the US. Now we can have small cars that get 60 mpg with those diesel engines; a huge part of why we can't get there from here now is the crash standards in the US that prohibit the sale of vehicles available across the Atlantic. Why can't we build those here? Because of our emissions and crash standards here in the U.S.
Finally, there are other automakers in the United States that do not need bailouts. Honda, Toyota, BMW and others have plants in this country that are building cars, and they'd doing ok. Yes, their profits are down, but they're making money and producing cars with American workers.

If the UAW, GM, Ford and Chrysler can't compete with these foreign auto firms, using American workers, on our own soil, that's just too bad. Then, it may be time for us to drive an American-built Toyota until GM and the UAW learn the lessons of a market economy.”