Should the US Taxpayer Bail Out the US Automobile Industry - Term Paper Example

 Should the US Taxpayer Bail Out the US Automobile Industry? For long, the US auto industry has been considered to be a massive creator of jobs and a reliable engine of productivity. Not only the American culture has assimilated the US auto industry in its folds, but the industry under consideration is a vital and integral component of the American economy. However, the things have drastically altered in the current scenario and the US auto industry does not stand to pose a really rosy picture.

The question that impinges upon the consciousness of the politicians, the taxpayers and the intelligentsia is that should the federal funds be used to bail out the US auto industry out of the doldrums supposed to be unleashed by the existing credit crunch? The answer to such a query should certainly be no, as such an approach goes against the sound economic principles and the spirit of free market, which have been able to furnish the US economy with a competitive edge and a resilient sense of sustainability till date.

Besides there exist questionable approaches and elements within the framework of most of the top US automakers, which if supported by a bailout, stand to persist. The fact is that the American automakers seek money from the US taxpayers to retain their status quo, rather then for embarking upon an ambitious program to weed out the inefficiencies and lacunas existing within their setup (Gattuso and Loris 1). The politicians prefer to justify such emergency measures by citing the massive losses incurred by the US automakers.

Off course their exists ample truth in such claims. In October, the sales of GM fell by 45 percent (Gattuso and Loris 1). The Chrysler and Ford also reported respective plummeting of sales by 34.9 and 30.2 percent (Gattuso and Loris 1). The automakers ascribe this drastic drop in sales to the existing credit crunch. Still, one can not deny the reality that the US automakers did take many shoddy decisions before the credit crunch that unleashed the current crisis (Gattuso and Loris). Consequently, the US auto industry aught to change the way it works and operates, rather then attempting to stubbornly continue with its unsound policies by seeking a bailout.

First and foremost, the US automakers must take care of the huge disadvantages in the costs that they suffer from, when compared to the foreign brands. The average hourly compensation paid by the US automakers to their employees is way ahead of the remuneration extended by the foreign brands to their workers (Perry). The US tax payer is not bound to bail out the US auto industry, when it compensates its workers 52.5 percent more then the average market rate and an astonishing 157 percent more then the compensation received by any American worker employed in other industries (Perry).

When one considers the retiree benefits in addition to such high wages in the US auto industry, the whole situation appears to be absurd and far removed from the existing market realities (Romney 1). The US auto industry till now relied on big, non-fuel-efficient vehicles to make profits and seldom cared to invest in developing fuel-efficient models (Gattuso and Loris 2). How can the tax payers expect that the auto industry will be able to address such problems, when it has been postponing the necessary changes for long?

A bail out will only give it a chance, to continue with and perpetuate its faulty policies. Perhaps an honorable bankruptcy seems more pragmatic in the sense that it will give the US auto industry a chance to off load its paralyzing obligations and will leave it much leaner and competitive. Works CitedGattuso, James L. and Loris, Nicolas. “The Detroit Bailout- Unsafe at Any Cost”. The Heritage Foundation. 16 Nov. 2008. 11 Dec.

2008 Perry, Mark J. “Should we Really Bail out the Big Three Automakers with $ 73.20 Per Hour Labor? Seeking Alpha. 10 Nov. 2008. 11 Dec. 2008 Romney, Mitt. “Let Detroit go Bankrupt”. OP-ED Contributor. 18 Nov. 2008: 1-4