The Losers in the GM Bailout

Writing at WSJ, William McGurn has some astute observations about those losing out because of the Washington continued bailout of General Motors, et al. Here are a few he mentions:

Americans working in U.S.-based auto plants owned and operated by foreign companies. These auto makers have also been hit by the recession, and some are laying off American workers or putting their American expansion plans on hold. Still, these car companies generally operate from a more competitive cost structure, and they have been gaining market share because they are building cars that more Americans want to buy at prices we are willing to pay. Why should these workers, who generally receive lower wages than their Big Three counterparts, see their tax dollars go to bail out their competitors?

American shareholders who have invested in these successful auto companies. When investors buy stock in an enterprise, they do so based on their read of the economic environment. Those who have invested in foreign auto makers have done so on the rational basis that these companies have a competitive model that offers them a chance for profit. How fair is it for the government to come in now, tilt the playing field, and diminish the value of their investments by propping up their less successful competitors?

The American taxpayer. It’s one thing for the government to intervene to prevent a panic from spreading. There’s even an argument for providing loans to tide companies over until they have worked out their restructuring, or prepared a plan to enter Chapter 11 in a way that will avoid complete liquidation. The president was right to talk about the contribution America’s auto giants have made to a thriving middle class. But should we be bailing out GM and Chrysler because they are an important “emblem of the American spirit”?

Finally, the GM and Chrysler workers themselves. Plainly, whatever company emerges from this turmoil will have fewer employees working for more sensible wages and fewer Cadillac-style benefits. Right now the argument has been that no one will buy cars from a company that files for bankruptcy. But if you had to bet, which offers the best chance for a brighter upside: a company that restructured under Chapter 11 or one restructured with the help of Congress and the White House?

Full article here.