Detroit Bailout Proposals: Disappointing, Incomplete

Chrysler, GM offer no plans to get people to buy their cars
By Jason Farago,  Newser Staff
Posted Feb 18, 2009 10:50 AM CST
General Motors and Chrysler are seeking a further bailout from Washington.   (AP Photo/Carlos Osorio, file)
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(Newser) – GM and Chrysler now want another $22 billion from Washington—and propose to use dramatic job cuts to help right their respective ships. What both companies avoid, writes economist Susan Helper for the New Republic, is an appraisal of the real problem: Nobody wants to buy their cars. Rather than cutting labor costs, the companies need to figure out  why a typical American car sells for $2,000 less than a comparable Japanese model.

Anti-union rhetoric notwithstanding, labor constitutes less than 10% of the cost of an American car. Far more money can be saved from waste elimination, collaboration, and especially suppliers—GM spends a whopping $50 billion every year on parts from third parties. Yet while Detroit's plans are disappointing, writes Helper, the industry is still worth preserving; otherwise, states already pummeled by the recession could lose as many as 3 million jobs.