Should or Should not the American government bail out the auto industry?

As I was going through the news on the American auto-indstry, I observed a clear division between people. One group is saying that auto-makers deserve the $25 billion subsidy but the other group is saying that instead of giving money, the policy makers should think of alternative ways such as extending unemployment benefits, cutting tax and giving high rebates to car buyers so that they become motivated to buy cars which would help the auto industry a lot. If subsidy is given then it should come with strict conditions and the industry should be watched closely. The Wall Street Journal says:

While the details of the bailout have yet to be hammered out, all signs point to loan guarantees conditioned on concessions from the stakeholders -- perhaps cuts in union and white-collar compensation, surely restructured bank debt, and maybe a shotgun wedding between Chrysler and GM. This would keep the industry alive and most of its workers employed -- for a while.

Nancy Pelosi, Speaker, United States House of Representatives, said that she had wanted a “lame-duck session of Congress” to give $25 billion to GM, Ford and Daimler-Chrysler. News Ok .com says:

Nonetheless, Washington should say no to a Detroit bailout. No to a conditions-free influx of taxpayer dollars, no to more good money after bad, no to setting a dangerous precedent that will have other struggling industries lining up at Washington’s trough.

Even if the industry recovers, the price will be very high and it will change the good relationship between Detroit and Washington and thousands of people will lose their jobs but it will at least save the industry and employments of millions of other people.

Related articles:

Wall Street Journal

News Ok

Sky News

Fall of American auto-industry will cause more job losses.

The American auto industry is in a critical condition. Yesterday, I wrote about GM’s poor condition and possibility of filing for bankruptcy. The same thing is happening with Chrysler, and Ford. IF these three companies collapse, it will be a big blow to America’s economy. David Cole, Head, Center for Automotive Research, said that about three million jobs will be lost if the American automotive industry collapse. There are so many businesses that are linked to the three automobile manufacturers such as parts suppliers, car sales and repair etc. If these companies are shut down, they will also affect these businesses. Patrick Anderson, Chief Executive, Anderson Economic Group, said that failure of one car maker would result into a job loss between 60,000 and 80,000. Guardian says:

David Cole, head of the Centre for Automotive Research (CAR), an influential Detroit think-tank, said that so many US businesses depended on the Big Three for survival that allowing even one of the carmakers to fail would lead to tens of thousands of jobs losses nationwide.

On November 17, 2008, the US Senate will decide whether they should give a portion of the $700 billion to US auto makers. Many people in and outside the politics, think that it would be a bad idea to give money to the auto- industry. Mr. Anderson believes that even after government’s intervention, at least 35,000 jobs will be lost. He said that necessary restructuring of the industry would lead to between 30,000 and 40,000 job losses around the country.

Related article:

Guardian