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What if the "bailout" had not happened?

John Day

John Day

Posted Oct 14, 2010
2 Comments

The New York Times published a positive story about Detroit this week (Oct. 12). It referenced the fact that U.S. brands edged imports in J.D. Power's Initial Quality Study, 108 to 109 PP100 (problems per-100 vehicles within 90 days of purchase). Ford cracked the IQS top five for the first time, and Lincoln had 23 fewer problems per 100 vehicles than it did last year. Chevrolet, GMC and Cadillac all won awards. David Sargent, J.D. Power VP of automotive research, said when the IQS was released earlier this year, “This may mark a key turning point for U.S. brands as they try to win the battle against negative perceptions of their quality.” The Times article noted that Ford and GM posted nice sales gains for the year-to-date and are both profitable, and they are attracting younger customers who in previous years would have opted for an import. One customer quoted in the article decided on a Ford Fusion after pronouncing Ford’s Sync multimedia system “pretty cool.” Chrysler sales in September were up 61% over last September. Ford was up by 46%, and total sales for Chevrolet, Buick, GMC and Cadillac increased by 22%. While there is no guarantee of long term success, Ford, GM and Chrysler are all doing well now. What would have happened if taxpayer money had not been used to keep GM and Chrysler afloat? It’s a complicated question that some can answer easily on principle and others might answer based on bitter experience. In my opinion, the “bailout” had to happen because the alternative – the very likely liquidation of two of the big three – would have been a disaster for the U.S. auto industry and for the U.S. economy. The wisdom or folly of government intervention could be argued for years, but so far, it appears to be paying off. What do you think?

New York Times, J.D. Power and Associates, Chrysler, Cadillac, Chevrolet, Buick, GM, GMC, Ford, Ford Sync

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John DayJohn Day recently launched John Day’s Automotive Electronics News (johndayautomotivelectronics.com) to provide news and feature coverage of the automotive electronics industry. Earlier he wrote for Auto Electronics magazine, Auto E-lectronics, EE Times, and other business and engineering publications. Visit John Day

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Comments 2

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I do not believe that bankruptcy would have led to liquidation of the automakers. It would have led to the liquidation of the union contracts and other bad deals that they have gotten themselves into. They would have had to restructure with a business plan that is profitable and they would have emerged much stronger companies able to really compete against the foreign automakers. But alas, that has not happened. Nothing really has changed except we spent 50 billion dollars in bailout, or $162 stolen from every man woman and child in the US (or $483 for those that actually pay taxes)

Jay Adams
5:58 PM Oct 18, 2010

Jay might be right about the companies surviving, but I think the cost to the USA would have been very high. Many more added to the ranks of the unemployed, the remaining workers would have less spending power, and a extended ripple through all of the OEM supply chain.

Lee Riemenschneider
1:23 PM Nov 30, 2010

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