Automotive Bailout: Demand & Politics

As noted previously, the problems in Detroit stem from a lack of competitive consumer demand exacerbated by cumbersome labor costs and retiree benefit payments. Interestingly, many of the covenants of the "Automotive Bailout Bill" seek to enforce the creation of smaller, more fuel efficient cars by Detroit (despite their best selling and most competitive vehicles being trucks). Robert Z. Lawrence points out that without legislative action to direct or alter consumer demand, such requirements may simply lead the Big 3 back to bankruptcy down the road, by producing cars that no one wants (Americans like SUVs when gasoline is cheap).

On the topic of the recent stall of the Bill in the Senate, Robert Reich provides insight into motives and realities in the political arena.