Auto Bailout Tide Turns

They didn't make the case for the billions.

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It is not hard to understand that the producing and consuming of automobiles might properly seem the purpose of life to the General Motors management, or that it might seem so to other men and women deeply committed economically or emotionally to this pursuit. If they so regard it, they should be commended rather than criticized for this remarkable identification of philosophy with daily duty. It is harder to understand, however, why the production and consumption of automobiles should be the purpose of life for this country.

Jane Jacobs, The Death and Life of Great American Cities, 1961.

We've reached an important moment in the current economic crisis. If a bailout for the auto sector is truly dead until the Big 3 come up with a plan for the government's cash, it will be because this is the week America finally decided against throwing more cash into even our most iconic industries.

Watching this debate last night between the NYT's Andrew Ross Sorkin debating David Cole from the Center for Automotive Research on Charlie Rose sums up the sentiment: Drastic change, not extra help, is what's needed in Detroit.

Mitt Romney's Op-Ed this week struck the same note:

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

Our own Rick Newman, who smartly backs bankruptcy, sees a tide that began turning against American automakers decades ago:

They alienated millions of customers. You have to try hard to give up 30 percentage points of market share, which is what the domestic automakers have done since 1970. The downfall began with the introduction of cheap cars like the Ford Pinto and Chevrolet Vega, meant to battle thrifty imports. Those cars and numerous follow-ons now wear badges of horror identifying them as some of the worst cars in history—with millions of owners to bear witness.

There's an important point here: Willingness to support teetering industries may be faltering, despite obvious ongoing threats to the economy and markets (stocks are down hard again today). I'm not saying unqualified bailouts are a good answer, but as the likes of Citigroup continue to stumble, any marked change in public sentiment that threatens to shut off the tap should be watched closely.