Obama Hails Auto Bailout

Obama thinks he’s in a win-win situation because the situation is complicated. An alternative course was not taken so we don’t know what would have happened. Try to prove that this government action would have produced a better result than alternatives.

What would have happened is other investors would have purchased all or parts of GM and Chrysler. These investors would have included other auto companies and private investors.  Since they made investments in them, they would try to grow the companies. We don’t know what those outcomes would have been.

As it is, the companies are still trying to produce cars to fit CAFE standards. Small cars help the companies meet the standards because they lower the overall average.  The large cars themselves cannot meet the standards.  But when you average the fuel mileage figures the auto company can meet the CAFE numbers.  The government allows auto companies to average the fuel mileage of their fleets.  They balance out the average so the firm meets the overall fuel mileage standard. But the small cars are not profitable and the large cars are. So the firms try to balance their sales to ensure a profit and meet the standards. They have two masters: the customer and the government, and the result was unsustainable, hence the bailouts.



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