Question:
The traditional U.S. auto industry (the Big Three) has struggled for many years against competition from foreign-owned automobile companies. Their struggle was dramatically heightened in 2008 with the world-wide credit crunch and economic slowdown.
Automakers came to Washington in late 2008 asking for Federal financial aid to avoid bankruptcy and possible liquidation. Their reception was chilly, but after heated debate, General Motors and Chrysler were granted government loans and loan guarantees. Ford Motor Company decided to rescind its request for government aid in order to avoid the conditions placed upon the proffered loans. At present, Ford and General Motors are profitable again, but Chrysler continues to struggle.
Should the U.S. Government (which means, the U.S. taxpayers) have aided the automobile industry? Why or why not? As part of your discussion, keep in mind that the U.S. does have a successful automobile manufacturing industry, but it is not centered in the north of the country. Toyota, Honda, Daimler-Benz, and others have manufacturing plants in the South that, although impacted by recent credit crunches and recessions, have done well while the Big Three struggled.
What policy towards the automakers should we pursue? Should government leaders provide outright grants to the Big Three; what about more loans or loan guarantees? Should we stand back and let the market determine which companies stand or fall? Should we encourage mergers, and, if so, based on what criteria?