josh dinnerman

Bankruptcy is a good thing for Detroit–and other myths worth debunking.

I’ve never seen such misinformation floating around about the auto industry, whether it’s from New York Times columnist Thomas Friedman on the left or his colleague David Brooks on the right. They think Detroit should die. At least the Republican senators from Alabama and Kentucky have a reason for wanting to ruin Detroit. They don’t tell you, but their states have plants owned by Honda, Mercedes and Hyundai (Alabama) and Toyota(Kentucky). If General Motors goes down, the Midwest may sink into rubble, but Alabama and Kentucky will boom.

There’s a plus side to bankruptcy. Wrong. There’s no plus side. Name any existing auto company that has survived bankruptcy. Few people would be idiotic enough to buy a car from a bankrupt company. Trade-in value disappears. Warranties are worthless. Repair parts vanish. GM goes bankrupt on Monday and on Tuesday the only customers are vultures looking for giveaway deals. In fact, sales are probably collapsing now because of all the bankruptcy talk.

The government can appoint learned bureaucrats to run GM right. Have you ever heard of a successful government-run auto company? Sure, they work if all other cars are banned and they torture anyone who criticizes the design. I’ve seen some: the Trabi, built by East Germany, or the cars of the nationalized British auto industry until that industry died, or those Renaults when the French government ruled. Let’s not even mention the Soviet cars.

This entry was posted on Wednesday, December 10th, 2008 at 5:40 am and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.