Chrysler's startling recovery in the early-80s is today an oft-recounted story, yet one that invariably characterizes the event as a "bailout." It is perhaps this attitude that has permitted President Bush to be quite unperturbed by the plight of America's Big Three automakers, judging by a flippant series of on-again, off-again scheduled meetings between the White House and the Detroit CEOs.
Perhaps the Big Three's most acute problem is that these companies bear an enormous health care burden versus the younger Japanese automakers.
Yet much though health care might legitimately be viewed as an issue with implications reaching far beyond the automotive industry, there remains little chance of a wider discussion beyond that which blames the Big Three for their overcapacity.
While the Japanese government has long supported its automotive industry both financially and politically, the idea of government intervention has in the United States long been viewed as far too contrary to the teachings of Adam Smith.
On the other hand, the old edict that free trade allows each country to maximize its production efficiency, and that it satisfies each country's consumers in giving them the greatest array of choices, seems passionless when faced with the myriad identities and emotions associated with the automotive industry's brands and products. This is quite apart from the distinction between free trade and fair trade, a distinction that curiously few opinion leaders seem wont to discuss.
Perhaps more importantly, after the specter of British MG-Rover's collapse last year, there are practical considerations at stake.
At Serbian automaker Zastava these past few weeks, an ongoing political battle has been brewing over whether the government will back the 8 million euros required to build Fiat's Punto at Zastava's Kragujevac factory. At least 1,000 jobs depend directly on a positive outcome. Since the Punto is something of a lifeline to 21st century technology for Zastava, one might add that Zastava's 15,000-strong workforce effectively hangs in the balance - as does, indirectly, the automaker's hometown of Kragujevac.
No matter Zastava's comparative insignificance, vis a vis the automakers of the United States and Europe. The bind in which Zastava finds itself may well prove to be a microcosm of sorts, in that it is commonly argued that the Serbian government cannot very well support the automaker if it wishes to do things as does the West.
Yet no less than the French government has recently moved to put more than 100 million euros into retraining approximately 20,000 employees who will likely be deemed surplus to PSA Peugeot-Citroen; this, atop a 400 million euro government injection into Peugeot R&D over the next three years.
Contrary to Adam Smith it may be, but the French are not about to make the same mistake as did the British. Thinking that the plants of import manufacturers would save their industry, the British government was content to let MG-Rover fail - only to see Peugeot recently begin moving production from Britain to Slovakia (where the government has subsidized the automotive industry to the point that Slovakia has become the largest automaker in the world, as a country, per capita).
As for Chrysler's "bailout" - rarely is it mentioned that, under Lee Iacocca, the company paid back the loan years ahead of time.
More rarely still is it ventured that supporting and retraining Chrysler's employees, had the company failed, would likely have cost considerably more than did the loan.
