Friday, December 12, 2008

Where the Auto CEOs Went Wrong

With the UAW insisting on everyone taking a wage cut but them, the auto bailout bill sank into oblivion yesterday. Better luck next president.

How is it that GM & Chrysler (Ford only asked for a line of credit, not a multi-billion handout) cannot catch a break? According to Andrew J. Coulson of the Cato Institute, they need to think more like the public education system.

Coulson's tongue-in-cheek op-ed "What Automakers Could Learn from Public Schools", is worth a few moments of your time.

Here's a taste:

Detroit's first mistake was to wait until it was in dire straits before wooing taxpayers. Education officials began asking for massive public funding in the early 1800s, when enrollment, literacy and median income were already growing rapidly without much government funding.

What the automakers should have asked for was permanent government ownership and control. Consider how well this has worked for public schools. Between 1970 and 2005, real, inflation-adjusted public school revenues more than doubled.... And the schools didn't have to compete with anyone or show any improvement to get it! According to the National Assessment of Educational progress, 17-year-olds perform no better academically today than they did back in 1970.

If the auto industry had gotten a similarly sweet deal (double the revenue, no improvement required) Chevrolet would still be able to sell 1971 Impalas today, at a whopping $43,479! Due to the rigors of competition, however, they've been forced to innovate and keep prices down. They've had to improve mileage and mechanicals, refine fit and finish, add airbags and On-Star, and they still can't get away with charging more than $21,975 for their vastly improved 2008 model.

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