The Instigator
Pro (for)
11 Points
The Contender
Con (against)
7 Points

The U.S. Government Should Allow the Big Three Automakers to Go Bankrupt

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Post Voting Period
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Voting Style: Open Point System: 7 Point
Started: 11/18/2008 Category: Politics
Updated: 8 years ago Status: Post Voting Period
Viewed: 2,121 times Debate No: 6002
Debate Rounds (3)
Comments (6)
Votes (3)




1. Definitions. For the purposes of this debate, the "Big Three" are General Motors, Ford, and Chrysler. "Bankrupt" is a legal state of financial insolvency whereby (a) stockholders lose all of their equity investment, (b) future contract obligations of the corporation are voided, and (c) creditors are apportioned the corporate assets under court supervision. It is within the scope of the debate to permit modifications to the existing law, a "special" bankruptcy, so long as the three provisions of the definition are broadly maintained. Welfare assistance to unemployed workers may be provided by the Government, separate from any bankruptcy. What is at issue is the Government providing loans or grants, a "bailout." to one or more of the Big Three solvent in order to avoid bankruptcy.

2. A bailout would at best postpone inevitable failure. Automobiles can be manufactured profitably in the United States. Foreign-owned automakers such as Toyota have many plants in the U.S., and those plants manufacture profitably. There are two reasons why the Detroit-based Big Three are failing: (a) their labor costs, in Michigan and other northern states, are approximately double that of the plants, mainly in the South, run by foreign manufacturers, and (b) the Big Three has many billions in legacy costs accrued from labor contracts that provide lavish pensions. A bailout will do nothing to remedy these basic problems because the contractual obligations for both will remain intact. Only bankruptcy can remove the continuing obligations. Thus a bailout will ultimately waste the taxpayer's money.

"G.M. has an unfunded liability of $85 billion in today's money to cover future health care costs for workers and retirees. That is seven to eight times the market value of the whole company. ... G.M.'s pension plan has also been a drain. Since 1992, G.M. has plowed $56 billion in stock and cash into it. ..."

3. A bailout will set a precedent whereby Congress will be obliged to bail out other companies that failed in the free market. There are currently 35 automakers in the category of making more than 200,000 vehicles per year, and all of the top 17 sell products in the United States. At a time when there was little international competition, unions demanded high wages and benefits and U.S. automakers granted them. These were extremely unwise decisions that led to failure of the companies. However, in a free market, the companies that cannot compete should fail and cede the market to successful competitors. Having the government subsidize non-competitive companies is a bottomless pit. Even if the bail out were to work, by some miracle, in the auto industry, there would be a very long line of other failing companies demanding equity by receiving a similar bailout. The precedent should be avoided.

4. The impact on U.S. jobs will be less than feared. One may ask why the auto companies in Japan and Germany have decided to build manufacturing plants in the United States. Clearly, the economics favors domestic production. It only favors it, however, when companies have a clean slate in formulating wage and benefit packages and selecting tax-favorable states for operations. Having the Big Three go bankrupt will not change the fundamental economics that favors domestic production.

Industry analyst Rich Folts states, "But because of the weak dollar versus the euro and some of the other currencies around the world, manufacturing may see a resurgence here -- perhaps not in Detroit because it's still high cost, but in other parts of the country such as the Deep South where unions aren't as prevalent. ... Working with global European suppliers, I see a greater emphasis on moving operations to the U.S -- particularly the South. They see the potential to expand because we're still the largest economy in the world. It provides them the opportunity to increase their capacity at a lower cost and be closer to their customers."

5. We should not fight the markets. It may be the case that ultimately auto manufacturing will become uneconomic in the United States. It isn't clear because the increased productivity from high tech automation helps compensate for increased labor costs. If that turns out to be the case, then attempting to forestall the inevitable would be a terrible mistake. In 1900, 92% of American jobs were in agriculture. Now it is about 4%, although substantially most food is produced. Suppose the government had, in 1900, decided to do everything possible to keep all of the jobs in agriculture? that isn't the path we should adopt now. We should let the market determine the best allocation of resources.

6. Easing dislocation is a proper government function. There is the potential for substantial economic dislocation during the realignment, however, the resolution allows the government to ease that dislocation. The methods for doing that including a phased selling of the auto company assets to new owners who can profitably keep the production lines running. Also, the government can provide for unemployment benefits and retraining of workers.

7. Industry transitioning can succeed. There is an excellent example of a similar situation. North Carolina was once heavily dependent upon textile manufacturing and tobacco growing. those industries became largely non-competitive. Rather than receiving bailouts, the state successfully transitioned to new industries, including finance, pharmaceuticals, and technology.

8. Conclusion. The government can help the Big Three transition to new ownership under a bankruptcy sale and redeployment of their assets. The union pensions already have billions in funding, and they would get more as creditors in the sale of the assets. The government can also provide aid in unemployment benefits, retraining, and relocation. What the government should not do is waste taxpayer money in a vain attempt to postpone the inevitable.


With thanks to my opponent for starting such an interesting debate, I should firstly like to like to accept his definitions.

To begin, I would like to say that the US Government could usefully learn from the lessons history has given us.

Most recently, we have seen the US Government hand out vast sums of taxpayers' hard-earned cash to investment banks on the understanding that they would resume lending and do all possible to prevent mortgage foreclosures. However, the recipients of the money clearly had no intention on discharging their responsibilities and instead used the cash to feather their own nests.

Apparently, a banker's word is no longer his bond!

In view of this, if the American motor industry is to receive state aid, it must be conditional and any settlement must be founded on something more substantial than the type of gentleman's agreement that was made with the banks. Certainly, the taxpayer must take a sizeable financial interest in the industry, so that when it recovers, its investment will be adequately rewarded. Furthermore, Government representatives should assume controlling positions on the Boards of Directors to ensure that taxpayers' money is spent on the restructuring and product development that it was intended for.

If this was done, a financial aid package from the Government could rescue the American motor industry from oblivion. Once again, we can look to the history books for evidence of this.

Without state intervention, many of Europe's most famous marques would not be on the road today. For example, there would be no Jaguars or Range Rovers (these brands were formerly part of the nationalised British Leyland motor company which was subsequently de-merged and privatised) and there'd be no Ferraris (Ferrari is part of the Fiat group which received state funding for many years but is now profitable) and there would be no Renaults (not that there are many in the US, but the company was in dire straits before it was rescued by the French government – it is now the world's 5th largest producer of vehicles).

British Leyland



However, in order to make the car companies successful, painful decisions had to be made. There were plant closures, out-sourcing, mass redundancies and asset stripping. Also, certain makes and models went by the wayside. For example, Rover, formerly part of British Leyland, produced millions of cars every year in the UK. However, unlike Renault and Fiat, they didn't invest in developing new models so customers went elsewhere. This resulted in the factories in the UK closing and the production rights being sold to companies in China and India, where outdated European models can still be competitive with domestic products

Now the growth of the SUV and truck market in the US over the last decade has been nothing short of phenomenal, and for a while, US domestic products led the way. However, the European and Japanese manufactures were not slow to invest in rival products and now their more advanced models literally leave American offerings in their dust. Please compare two similar sized models: one home grown, one from Europe.


Engine – 6.2l V8 petrol
Power – 398 bhp
Torque – 574 lb/ft
0-62 mph – 7.8 seconds
Top Speed – 110 mph
Fuel Economy – 17 mpg

Audi Q7

Engine – 5.9l V12 twin-turbo diesel
Power – 493 bhp
Torque – 738 lb/ft
0-62 mph – 5.5 seconds
Top Speed – 155 mph (electronically limited)
Fuel Economy – 25 mpg

The figures speak for themselves, but bear in mind also that the Audi is more dynamic, better built, more spacious and has higher residual values and it is easy to see why HUMMER sales are plummeting.

At the end of the day, the American manufacturers must move with the times. Fuel economy is now one of the most important factors when consumers decide what new car to buy.

However, while the Europeans and Japanese have been producing hybrid, electric, bio-fuel and diesel-powered cars for many years, the vast majority of cars produced by US manufacturers run on gasoline (petrol).

My opponent suggested that the impact on the economy of allowing the "Big 3" to go belly-up would not be too severe as production would be taken up by manufacturers in the South, where labour costs are lower. They may be lower in the Southern States, but they are lower still in Korea, China and India, who would be happy to export even more modestly-priced cars to the US. Meanwhile, European manufacturers would be happy to ship over even more upmarket vehicles to meet any untapped demand.

Unless the "Big 3" compete on technology, performance, reliability and overall value for money, they will ultimately fail. They need to invest in models that meet the future needs of the consumer and that takes billions of dollars and many years. Since they haven't got the cash to do this and cannot raise the investment privately, the Government is the lender of last resort.

My opponent also suggested that a bailout would set a precedent, but I disagree. The only industries that any government would provide financial assistance to are the one's that are vital to the economic infrastructure of the country. They may include, agriculture, heavy industry and, as we have seen, banking. Without manufacturing industry and farming and banks to administer the finance, the US would be brought to its knees. The economy cannot survive on service industries alone: someone, somewhere has to produce the goods that are sold in American shops.

The 5th, 6th and 7th points my opponent raised were related and suggested that the will of the markets should prevail and the only job of the Government was to pay for unemployment benefits and re-training schemes. In my opinion, the job of the Government in a laissez-faire economy such as that of the US, is to provide a framework within which commerce and industry can flourish. In a global marketplace this may mean regulating financial institutions in order to protect the economy or giving financial assistance to vital industries to avoid American jobs being lost to overseas rivals. After all, surely it is better for the Government to gain from workers' income tax receipts than it is to pay for unemployment benefits?

In conclusion, the writing for the car industry is on the wall. Since no private investor is forthcoming, they will go belly up unless the Government steps in with a bailout. Given the choice between unemployment for all its members or a restructuring plan that will safeguard the jobs of most of its members, no union would cut its nose off to spite its face and oppose a restructuring plan that would result in lower labour costs, thus freeing up resources for investment in new models. If proper controls are put in place, a timely Government investment could revive the American motor industry and enable it to compete with foreign manufacturers in the domestic market. Who knows, perhaps one day American car companies could start exporting vehicles beyond Canada in meaningful numbers? We'll never know unless the Government gives them the chance.
Debate Round No. 1


1(a). I cited legacy costs as the reason why a bailout would not rescue the Big 3. Having new designs might otherwise help the companies improve their profitability, but the obligations under exorbitant past labor contract would keep the companies uncompetitive. Con failed to address legacy costs, and implied that there was nothing needed but new designs. As referenced in the Times article I previously cited, the reason that the Big 3 are lagging in their designs is that their legacy costs have limited what they can invest. After a bailout brought designs up to date, legacy costs would then limit the next generation of designs, unless, of course, money is pumped in for decades.

1 (b) The argument that an Audi is an inherently superior to a Hummer is irrelevant, but false as well. The Hummer is a specialty vehicle with negligible sales. It is designed for severe off-road use. The Q7 is a lovely luxury vehicle, but it is not even designed for off road use. (Will Europeans actually prefer to go to war in an Audi Q7? That sounds like Monty Python material.) In the US there are still state highways built of dirt and gravel where with a regular car you have to stop to push rocks out of the way. Specialty vehicles are designed for special uses and say nothing about the automobile market in general.

1. (c) The argument about taking a lesson from the banking bailout begs the question of exactly what the lesson is. The current resolution is offered as reflecting the pertinent lessons. The banking bailout could only be justified as a symbolic action to end panic that was potentially destructive. It was a psychological remedy more than a financial remedy. There is no comparable panic relevant to the auto industry.

1.(d) Con argues that there are examples of successful government bailouts of European automakers, thus preserving the supply of Renaults to the world. I challenge that on two grounds: None of the bailouts involved the issues of legacy costs that make the Big 3 inherently non-competitive, and "success" should not be measured by the survival of the name plate. All government sponsored programs are successful in the sense that they can keep something going as long as taxpayer money is pumped in. For example, the Big 3 could be "successfully" rescued by dumping in a couple hundred million to pay off the legacy costs. that is success in the narrow sense, but failure in terms of serving the best interests of the taxpayer. The taxpayer is best served by letting failed enterprises be replaced by successful ones.

I think con is also appealing to nameplate nostalgia, that surely traditions should be kept alive. That is worth something, perhaps, but not what a bailout would cost. Another way to preserve the nameplate would to require that whoever buys assets under the bankruptcy sale must continue to produce cars under the brand name. Buyers would generally want to do that anyway to cash in on brand loyalty.

2. Con did not respond to any of the reasons given as to why a bailout would merely postpone inevitable failure.

3. Con asserts that a bailout would only serve as precedent for bailing out some other industries. Con states "The only industries that any government would provide financial assistance to are the one's that are vital to the economic infrastructure of the country. They may include, agriculture, heavy industry and, as we have seen, banking." That leaves plush toys to the whims of the marketplace. Times of economic contraction are painful, but they serve to eliminate non-competitive companies, and sometimes non-competitive industries. For example, there was an issue of preserving the US clothing manufacturing industry that went on for decades. The industry is labor-intensive and is best done where labor costs are low. The industry has largely moved overseas, but the job losses were transient as other industries developed to take its place. It would have been far worse if government intervened to "save" the industry. Automobile manufacturing is in no sense a strategic industry, and in any case, the economics dictate that autos will be manufactured in the US for the foreseeable future, just not with the same corporate governance.

4. I argued that fundamental economics will keep auto manufacturing in the United States, as witnessed by the large presence of Japanese and European manufacturers producing domestically. Con provided no rebuttal to this argument beyond noting that labor costs are cheaper yet in China and Korea. It is true that labor costs are cheaper in China and Korea, but labor costs are only one component of total costs. Other factors include responsiveness to local markets, training costs, infrastructure costs, access to capital, design costs, and availability of automation technology. That is why the US remains competitive overall when the legacy costs are taken out of the equation. If labor costs were the only costs, those Audis would be made in China as well.

5. Con asserted that market forces should not prevail, but failed to give reasons why they should not. I used the example of agriculture declining from 92% to 4% of jobs over the past century. At 92%, it was clearly the most important industry by far. I challenge Con to explain what would have happen if agriculture had been protected by government, rather than allowing market forces to prevail. A 92% industry clearly meets Con's requirement of one that is important enough to be preserved. So should it have been preserved?

6. - 7. Con did not dispute that government could and should facilitate industry transition, and that would minimize the short-term dislocations to an acceptable level as the economy adjusts. I take those points as accepted.


I offer my apologies to my opponent, in my attempt to address the issue "tout � fait" I failed to directly address some of the points he raised. To make amends, in this round I will tackle each point in turn.

1 (a) – Legacy costs are, indeed, a huge impediment to the future success of these firms. That is why they need to be re-negotiated with the unions. As I mentioned previously, given a stark choice of productivity deals, voluntary redundancies and reduced employer pension contributions on one hand and the total closure of the business on the other hand, the unions would have to accept the required restructuring measures in order to save their members' jobs.

1 (b) – I think my opponent may have been confusing the HUMMER H2 "soft-roader" with the formidable HUMMER H1 which is based on the US Army military HUMVEE. They are two very different kettles of fish. The former rarely goes off road and is more usually found cruising up and down city swanky boulevards adorned with chromed running-boards, low-profile tyres and spinners all of which preclude any off-road progress. They are more fashion statements for people with more money than sense or status symbols for small-time drug dealers than serious off-road vehicles. Regarding the Q7 – no I wouldn't want to go to war in one. That said, a bloke I met in the pub told me that SUV buyers in Germany are expected to invade Poland in them. Okay, he'd been drinking heavily, but still...

1 (c) - The bailout of the financial industry was botched because it was implemented as a panic measure. That doesn't mean to say some sort of rescue package wasn't necessary and in the long-term interests of the country. My point is that any bailout of the auto industry should be more circumspect and should be subject to on-going Government scrutiny. In the final analysis, the overall cost to the economy of unemployment benefits or well-paid skilled workers being forced to take low-skilled, low-paid service sector jobs would far outweigh the cost of any investment in the industry, even if it failed to produce any substantial direct returns in the future.

Regarding nameplate nostalgia, yes, my opponent is right, I do believe the public attach a value to this. One of Britain's oldest and most famous marques, Rover, is now in foreign hands all because the firm failed to invest in new models. This is a source of great national shame. Sure, you can still buy a Rover, but it will be a seriously outdated car that was made in China. I wouldn't like to see marques like Cadillac go the same way. At the end of the day, you can't evaluate everything merely in terms Pounds, Shillings and Pence – national pride is worth something too and we shouldn't always take the advice of people who know the price of everything but the value of nothing.

2 – In business, nothing is inevitable. No decline cannot be reversed provided the correct remedies are implemented. In the case of the "Big 3" this means streamlining and investment in research and development. This takes capital, which the companies don't have. Since the banks are unwilling to invest, the Government must. The alternative is that famous names like Ford, Chevrolet, GMC, Chevrolet, Dodge, Pontiac, Mercury, Lincoln, Jeep, Cadillac and Buick could fall into the hands of cash rich companies like Porsche. They recently took a 75% stake in Volkswagen, which was then valued at EUR287 billion (USD363 billion), which is more than the market value of companies such as Exxon Mobil or Microsoft.

Most Volkswagens are now produced where it is cheapest: in East Europe, Asia, Africa and South and Central America. Why would Porsche / Volkswagen, or any other foreign buyer, continue to produce bog-standard, labour-intensive vehicles in North America when it would be much cheaper to move production abroad?

Does a patriotic American really want to drive around in a Lincoln Shantytown Car or a Jeep Goatherder or a Pontiac Firebird Transvaal or a Ford Mule GT or a Cadillac de Favela or a Chevrolet Former Yugoslav Republic of Macedonia?

3 – My opponent's reference to state aid for the industries such as cotton growing and textiles represents a false dichotomy. This type of industry is low paid and low skilled. In Asia, cotton is picked and processed and the clothes manufactured by children which is why you can now buy a shirt for less than the cost of laundering it. Low paid, low skilled American workers never contributed huge amounts in tax revenues and can be easily redeployed into low-paid jobs in the service sector. Skilled workers on good pay in the auto industry contribute far more to the economy. Furthermore, firms that supply the car companies would have to shed workers on a wholesale basis if the auto industry was allowed to go to the wall.

4 – I broadly agree with my opponent that even though the "Big 3" were allowed to fail, cars would still be produced in the US, albeit by companies such as BMW, Toyota and Mercedes. This is what happened in Britain after our once proud motor industry went west. Here is the current list of car manufacturers in Britain, followed by which country the profits go to in brackets:

Aston Martin (Great Britain)
Bentley (Germany)
MINI (Germany)
Honda (Japan)
Jaguar (India)
Lotus (Malaysia)
Land Rover (India)
MG (China)
Nissan (Japan)
Rolls-Royce (Germany)
Toyota (Japan)
Vauxhall (USA)

Fantastic. Of the millions cars produced in the UK every year, only the profits of a niche market producer of hand-built sports cars goes into a British bank account. The rest is transferred to accounts in Munich, Tokyo, Mumbai, Kuala Lumpur, Shanghai, Nagoya and Detroit.

Again, this not just is a matter of money, but also national pride.

5 – My opponent wrote: "I challenge Con to explain what would have happen if agriculture had been protected by government, rather than allowing market forces to prevail."

Perhaps Pro is unaware that under the United States Farm Bill, American agriculture receives over $55 billion per year in Government subsidies? If market forces HAD been allowed to prevail, American farmers would be poorer and food would be cheaper.

Incidentally, the reason so few people are employed on the land compared to a hundred years ago has nothing to do with the decline of the industry and everything to do with farm mechanisation – a combine harvester can do the work of dozens of men.

Although I generally agree that market forces should prevail, some industries need Government support in order times of crisis. This is not for the benefit of the shareholders, they should understand that the value of their investments can go down as well as up, that is the risk they take. No, some vital industries need to be supported because the alternative would spell wider economic chaos. For example, if the power companies went bust, should the Government let the lights go out?

6 – Indeed, I do not dispute that the Government should facilitate industry transition, with the following caveat: provided it is not a key industry; and I would politely refer the voters to the passages hereinabove for a detailed explanation of my reasoning for this qualification.

Thank you.
Debate Round No. 2


1 (a) Con claims, "the unions would have to accept the required restructuring measures in order to save their members' jobs." If that were true, the labor unions would have already made the required concessions. This has been a constant subject of negotiations for many years, and the unions have given a little, but the evidence shows that that the unions have not approached what is necessary. General Motors, worth $8 billion, has $85 billion in unfunded health benefits alone. GM has poured in over $100 billion into the pension fund in recent years. GM pension fund obligations are more than $25 billion per year and they have been for many years. Yet the Union has not seen fit to substantially reduce the burden. If they had, we would not be having this debate.

Earlier in this debate, Con claimed that management was short sighted. That is correct, management was short sighted in agreeing to contracts that could not be fulfilled while keeping the Big 3 viable. However, the Union has proved to be every bit as short sighted, demanding a contract that would put the company under and refusing to back down from it. A good guess is that GM is about two months from being forced into bankruptcy. It is far too late to suppose the Union will back down voluntarily.

The first step in bankruptcy is Chapter 11, under which all contracts and obligations are canceled and the Court appoints a caretaker to reorganize the company. At that point, the Union can make a proposal to the caretaker as to what they think is a viable way forward. The caretaker can, however, ultimately arbitrate a plan. If no viable solution is found, then the company would proceed to Chapter 13, and all the assets would be sold off. The Union would get to keep its $100 billion existing pension fund. Bankruptcy remains the necessary first step.

1 (c) Con claims "In the final analysis, the overall cost to the economy of unemployment benefits or well-paid skilled workers being forced to take low-skilled, low-paid service sector jobs would far outweigh the cost of any investment in the industry, even if it failed to produce any substantial direct returns in the future." That claim is made without supporting data or analysis. We know that auto companies can manufacture profitably in the United States while paying wages and benefits that workers are willing to accept. We know that because the foreign-owned manufacturers are doing exactly that. Moreover, the likely result of bankruptcy is that there will be just as many skilled jobs in the US as before, because US auto requirements are so peculiar that foreign manufacturers have elected in large part to manufacture domestically. So what is at issue is whether the U.S. taxpayer should pay twice the wages and benefits to employees of the Big 3 to get the same number of jobs and automobiles as they would if they did not fund the bailout.

Con agrees, "Regarding nameplate nostalgia, yes, my opponent is right, I do believe the public attach a value to this." However, I proposed that the bankruptcy have the provision of requiring the nameplates be preserved. If the Big 3 are reorganized successfully under Chapter 11, that would happen as a matter of course, the only change being that wages and benefits would be brought into line with those of the foreign-owned plants in the U.S. In chapter 13, the nameplates would likely be an asset rather than a liability.

2. Con asserts, "In the case of the "Big 3" this means streamlining and investment in research and development." I previously provided evidence that the reason the Big 3 were investing inadequately in R&D was that they had legacy costs that drained their capital. It would be extremely unwise for banks or Porsche or anyone else to take over legacy costs that made the operation inherently unprofitable. Benz tried that experiment by buying Chrysler, discovered the situation was hopeless, and gave up. Chrysler is in a better position than GM. The problem is not with banks or investors being unreasonable, the problem is that there is no economically viable solution until the legacy costs are erased by bankruptcy.

Con asks "Does a patriotic American really want to drive around in a Lincoln Shantytown Car or a Jeep Goatherder or a Pontiac Firebird Transvaal or a Ford Mule GT or a Cadillac de Favela or a Chevrolet Former Yugoslav Republic of Macedonia?" One might as well as if patriotic Americans would drive Toyotas, Nissans, Hyundais, or Volkswagens. We know the answer: Yes, in very large numbers. The highest probability is that a Chapter 11 reorganization would keep the production lines in place with the same nameplates. If that fails, Chapter 13 would provide the cars made in the U.S. with new corporate ownership and management.

I think it is possible that nostalgia for traditional car manufacturers may be greater in the U.K. than it is in the U.S. However, Con previously cited European bailouts as being successful. Clearly, according to the data Con presents, bailouts in the U.K. were not successful in keeping manufacturing in the U.K. The bailouts just wasted taxpayer money in postponing the inevitable. Apparently, the cost structure in the U.K. is not competitive. As of now, U.S. costs are competitive, but only when not burdened by legacy costs. Therefore, the hope for retaining the jobs in the US is to eliminate the legacy costs through bankruptcy.

5. Con states, "Perhaps Pro is unaware that under the United States Farm Bill, American agriculture receives over $55 billion per year in Government subsidies? If market forces HAD been allowed to prevail, American farmers would be poorer and food would be cheaper." You must understand that American farmers are not, in any substantial numbers, families tending small plots of land. They are mainly large corporations running highly automated production of corn, wheat, and the like. Rice is planted by airplanes flying low -- things of that nature. Indeed, there are some subsidies, but those are a mistake. For example, the US used to subsidize sugar to 23 cents per pound when the world market was four cents. That was ended, yet sugar production in the US did not end; it shifted from cane sugar to beet sugar. My point is that providing producers with subsidies is a mistake because it leads to higher prices, and it prevents shifting resources into profitable areas. In farming, labor-intensive farming shifted to automated farming.

Con asks, "No, some vital industries need to be supported ... if the power companies went bust, should the Government let the lights go out?" No, in that case the government should put the power companies into chapter 11 bankruptcy and operate them under court supervision until they are reorganized or sold. But is there any possibility that Americans will not be able to get enough cars? There is no chance of that whatsoever. Production lines will continue under Chapter 11, and in the worst case production would be shifted to other manufacturing plants, probably in the South.

6. The point of facilitating transition is to minimize acute hardship. That ought to be done whether the industry is key or not key. The argument about preserving "key industry" is a separate one. I can see an argument for not having electric power companies owned by, say, the Chinese, on the grounds that ideology might trump their desire to make money. However, I do not see a problem with Europeans or Japanese owning power companies in the US. It is simply a source of capital, and they lose their money if they fail to sell power. We use foreign oil, which is far more key. We could use foreign-made autos if US manufacture here became infeasible.

There is no good reason for taxpayers to pay double to favor Michigan workers, when bankruptcy would yield the same jobs and the same production at lower cost. I urge voters to support the proposition.


With many thanks to Con for continuing this fascinating debate, I should like to reply as follows:

1. I have accepted my Pro's arguments that the unions have made the "Big 3" uncompetitive and I understand that the commitments the companies have made to their employees is partly the reason why they have been obliged to go cap in hand to the Government for a bailout. That said, the writing is now on the wall. The union members must accept that their employers must cut their cloth according to their means and accept a pay freeze and reduced benefits. The alternative would be to force their employers into bankruptcy. The unions and their members may be powerful, but they are not stupid. A proud car worker does not want to find himself queuing up with a behind a pack of spotty teenagers in a line for a McJob. For this reason, I believe the unions should and will work with the management to avoid the companies being taken into administration, even though Chapter 11 may still provide a way forward for the businesses.

Many articles have been written about the wider effect the closure of a major employer has on the local community. Here is a recent one that deals with the subject in hand:

It stands to reason that if a significant percentage of the population of a town is thrown onto the scrap heap when a major plant closes, they will no longer have as much cash to spend and there will be knock-on effects for local service sector businesses.

Pro's point about nameplates being a financial asset in Chapters 11 and 13 is accepted and I would envisage that most would survive bankruptcy procedure. My assertion was, however, that future vehicles would be produced by foreign owners; possibly in the US, possibly abroad. Either way, it would be a severe knock to national pride and although that has no monetary value, it is still worth something to patriotic Americans.

2 The legacy costs of a buyout at this stage do mean that even if the firms were sold for a dollar each, they would still make financially unattractive investments. That is true. That is why any public bailout should, as I have said, be conditional of root and branch reform of the companies' operations, with particular regard to employee benefits and the closure of outdated product lines. Future success will only come about by developing vehicles relevant to changing market demands.

My opponent did not directly address points 3 and 4 so please take them as read.

5. My opponent and I both agree that agricultural subsidies are a mistake.

Whilst it is true that America will not run out of cars if the "Big 3" automakers go to the wall, this was not the crux of my argument. The message I was hoping to convey was that to allow them to go bust would have a severe detrimental effect on the local and national economy, together with a loss of American self-esteem.

6. Transition is a useful tool, there is no doubt about that. It is especially important when a large employer closes a plant. However, prevention is better than cure and preserving skilled jobs is both cheaper and more desirable than subsidising new employers to take on workers in low-skilled, poorly-paid roles. It is for that reason that I have termed car manufacturing as a "key industry".

Whilst I agree that private investment should be accepted from any source, no matter from America or abroad, I maintain that the profits should boost the American economy and the main operations be based in the US to benefit American workers.

In conclusion, although bankruptcy need not be the end of the road for the "Big 3", thanks to the unique way America provides a parachute for failed corporations, it should be avoided at all costs. This is because the power is wrested away from the industry experts into the hands of administrators that know as much (or as little) about making cars as they do about selling insurance policies or growing GM crops.

For the sake of the economy and American pride I urge the USFG to invest in one of the country's most important industrial assets and ask the voters to vote Con in support of this proposal.

Thank you.
Debate Round No. 3
6 comments have been posted on this debate. Showing 1 through 6 records.
Posted by SouthernDeadhead 8 years ago
If we shouldn't let the Big 3 go bankrupt (according to most Americans), and we shouldn't bail them out (according to most Americans), what do they suppose we do? Those are Americans for you: can't decide about anything.
Posted by brian_eggleston 8 years ago
I also really enjoyed that debate, many thanks to my opponent.

I agree that, although we approached the issue from diametrically opposite sides of the political spectrum, by the end of the debate we broadly agreed on what the solution to the crisis should be.

I was also grateful to learn a bit more about bankruptcy procedures in the US - which are quite unique.

Whatever happens, I sincerely hope that profitable car manufacturing can resume in Michigan and that none of America's famous marques are consigned to the automotive history books.
Posted by RoyLatham 8 years ago
I enjoyed this debate. I think the Pro and Con arguments were responsive and tracked well, were comprehensible, and thoroughly explored the issue. Moreover, I think that there was close to a mutually agreed upon conclusion. Either the Big 3 should go into an official Chapter 11 to force removal of legacy costs, or management and unions should agree to a pre-packaged de facto bankruptcy that accomplishes removal of legacy costs without official use of the b word. It is too soon to tell if either of these things will happen, but Wall Street seems to be favoring a pre-packaged de facto bankruptcy. Unlike other bailouts, there is a constituency, the Southern states where manufacturing is possible without subsidy, opposed to giving a blank check to support Michigan et al.
Posted by mastajake 8 years ago
Yeah your right,

Thank for addressing my question with precision. I'm convinced, of your resolution that is :P
Posted by RoyLatham 8 years ago
Mistajake, you raise an interesting point. The U.S. has very stringent crash and pollution requirements that prevent imports that are not designed specifically for the American market. The Big Three have profitable overseas operations that build small economical cars, but they cannot import them into the United States. It would take 3-5 years to adapt an overseas plant to make cars for the American market. Since all the major foreign autos have existing U.S. facilities, it is far more likely that they would expand US capacity than build new facilities overseas. Besides, there would be substantial risk that the Congress would decide to ban or tax imports, and manufacturing domestically circumvents that risk.
Posted by mastajake 8 years ago
Would your resolution result in an influx of imported vehicle's resulting as a deficient move considering economic status?
3 votes have been placed for this debate. Showing 1 through 3 records.
Vote Placed by Labrat228 8 years ago
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