In an increasingly anxious campaign for a $25 billion government rescue, Detroit’s Big Three car makers and their allies in Washington are warning the demise of the auto industry will damage U.S. national security.
Indirectly, maybe. Big maybe. But the Big Three’s direct impact on military production is minimal.
Some things would certainly have an indirect impact on the military The supply base would shrink if the Big Three go under, for instance, meaning that some parts may be harder to get or become more expensive. There would be a sort of “brain drain” as the workforce shrunk and a lot of good people retired or moved on to other things. The ability to ramp up production in a truly catastrophic scenario would be greatly reduced. All of these things do matter and should not be ignored, but I’m not at all convinced that it’s worth bailing out the auto industry for gazillions of tax dollars so they can go on being bad businesses.
Much of what the Big Three contribute to the military can fairly easily be picked up by Toyota or other international manufacturers with US operations. If the Army needs pick-up trucks, they can be ordered from Toyota and built in the US.
Additionally, if the UIS makers really do go TU, the vultures will swoop in to feast on the remains. Parts of the industry with military contracts or the potential for such will be among the tastier morsels, I would think, and will go on in some fashion. As I said recently, there’s some good meat left on some of those bones.
In short, I think making claims that the US auto industry needs to be bailed out because our national defense depends upon it are exaggerated. However, when making decisions about what to do, the overall picture of US industry cannot be ignored.
More automotive bailout links:
- A Simple Argument Against the Auto Bailout: A Bailout Would Destroy Jobs
- Union busting is the real motivation
- GM is probably going to be back for more within the year
- Let Detroit Go Bankrupt
- What Would Ronald Reagan Do?