The Bush Administration has not officially decided what they will do for the auto industry. According to Reuters, Bush is not quite ready to save the Auto industry from the clutches of poor management and corrupt labor unions, stating:

President George W. Bush said on Monday an announcement on a auto industry rescue was not imminent, leaving the industry’s fate clouded in uncertainty for a little longer.

“We’re not quite ready to announce that yet,” Bush told reporters on Air Force One during a flight from Baghdad on an unannounced visit to Afghanistan.

He had been asked when he might make an anticipated announcement about tapping a $700 billion financial industry bailout fund to aid General Motors Corp, Ford Motor Co and Chrysler LLC.

Asked whether he was leaning toward using financial bailout funds, Bush said: “I signaled that that’s a possibility.”

Bush said a decision would not take long. White House spokeswoman Dana Perino said earlier that she had no timetable for a decision.

At this point I feel that an auto bailout is unavoidable, especially since our “conservative” president seems to think nationalizing every industry is a good idea. My question is simple, what exactly is giving $15 billion to the Big Three in short term loans going to solve? Will it make them more competitive with Japanese cars? No. Will it magically provide management with a sudden winning strategy? Certainly not. Will it cut the insane wage contracts that the Big Three have with the UAW? Of course not. All this money would do is put off the inevitable. Ford, Chrysler and GM are finished as we used to know them. They cannot compete with Japanese or German car companies because each car they produce has about $2000 of built in costs that Toyota, Honda or Nissan don’t have to worry about. Forcing American auto companies to become more “green” isn’t going to result in larger demand for their crappier, more expensive cars, it simply forces them to produce more cars that people are not going to buy.

Of course no one wants to see our American car companies fail, I think Bush is right that this would be a very very tough thing for our economy to handle, especially right now. The government could help though. They can work with the big three (especially GM at this point) and come up with a structured Chapter 11 plan which would allow them to restructure their debts (which are amazingly high) restructure their labor contracts and assure Americans that if you continue to buy cars from GM, warranties will still be honored. The big worry about filing Chapter 11 is that they think American’s won’t buy their cars any more because who wants to buy a car where there is a chance in 3 years the company won’t exist anymore to honor those warranties. The problem with this line of argument is that its a strawman. The whole point of Chapter 11 is to allow the company to keep on keeping on, not to go out of business. Filing a Chapter 11 is a signal that GM and the others want to stick around and are going to work hard to keep making cars. They all have good IP, its just their business model and labor contracts that suck.

I would urge everyone who is upset about this bailout to contact their representatives. There has to be an end to these bailouts, the government can’t keep printing money and handing it out to everyone who asks. There are going to be real consequences, we can’t avoid them. However, the longer we put them off (by trying to buy time with these bailouts) the more devastating these consequences will be. Its better to bite the bullet now and then try to figure out how to rebuild.