NBC Propaganda: Bailout the Only Out

Last night’s NBC Nightly News featured some odd unsubstantiated claims regarding the likely effects on the economy if a government bailout failed to prop up automakers.  Specifically I’m addressing comments made by CNBC’s Trish Reagan and Phil LeBeau, another CNBC reporter in this piece:

Here’s Trish’s quote:

"If one of them fails, the entire industry would be at risk."
– Trish Reagan 0:45

And here’s Phil’s":

"If one goes bankrupt, you’ve got a domino effect where it may bring the others into bankruptcy." 
– Phil LeBeau 1:15

Both seem to assert that the major auto manufacturers, GM, Ford, and Chrysler are somehow intertwined such that what is bad for one of them, going out of business for example, would be bad for all others.

This doesn’t make sense.

Presently, the three major US automakers are competing for the same set of resources.  They need talented workers, raw materials, and services from various suppliers.

Moreover, as the story states, while the nation needs autos – we’re not buying them as a leisure activity.  We’re buying what we need to get us around – practical cars that do the job frugally – assuming that we’re buying them at all.

Since there is a lack of demand, the supply of cars is very high if factories continue to produce at prior levels (this is what the Democrats want since they hope this would preserve jobs).  Another alternative is to let factories lay idle (which eats away at profits as expensive equipment depreciates unused).

The third major option is to consolidate.  Left to it’s own devices, market forces will allow the stronger competitors to cannibalize the weakest automaker – taking the most desirable brands, product lines, equipment, and employees.  The remaining skeleton can be sold at auction or scrapped.

The result would be an auto industry capable of making the cars we need, employing enough people to make that number of cars, and freeing the remaining auto workers to use their manufacturing skills and expertise in other industries – or to branch out into new endeavors.

Admittedly, if a government bailout focused on only one automaker, it’d have negative economic effects on the others – the government picking winners and losers should be ruled out entirely.  But if the economic bailout is spread among all automakers this just preserves the oversupply situation.

So where are Trish, Phil, and the CNBC folk getting the idea that having one less competitor would be bad for the other two?

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