If The Big 3 Aren't Bailed Out

It will not be doom and gloom. Of the 100s of thousands of people directly impacted, the disruption should be short term. Let's look at this piece by piece.

• Automobile purchases: Much of the projection seem to include the view that the automotive sector will be diminished by the current market share of the failing companies. Yet we will continue to purchase vehicles in the same number and type as before. Obviously, for those who would purchase from one of the failing companies, they will have to choose a car from another manufacturer. But if you're going to buy a car, you will still do so. Therefore the size of the retail car market is unaffected.
• Imports vs. domestic: If you accept the above argument, there is still the prospect that the manufacturing sector will decline proportionately while imports will rise. Short term this may be true since domestic supply will decline. However this is a short-term impact. Other foreign manufacturers (the big 3 are also foreign) have good economic incentives to manufacture locally, and this will not change. Short term they would likely add shifts and hire recently unemployed assembly-line workers from the failed companies.
• Suppliers: Outside the big 3, many of the parts come from overseas rather than from domestic parts suppliers. This is no surprise since there is a very tight relationship between supplier and manufacturer. For the big 3, many of their suppliers were originally part of those companies but were spun off for a variety of (good) business reasons. So, yes, all those parts suppliers could be in trouble. Here is where government could help by pressuring or providing incentives to the remaining manufacturers to source more parts domestically.
• Sales: Ever talk to automobile salespeople? Many of them hop among dealerships quite frequently during their careers. A salesman has no knowledge that is so specialized that it isn't transferrable to selling another company's cars. The dealerships themselves will have to change, of course, but then many have done so in the past as consumer preferences have shifted away from the big 3. There will a short-term acceleration of this trend, which I expect will not be overly disruptive.
• Service: Car dealers have a problem when they, as pointed out above, shift their businesses to selling vehicles from other manufacturers, and yet don't have trained service staff for those brands. Mechanics nowadays are highly trained technicians and much of that training is brand specific. Retraining will be required to support the cars being sold. While dealerships will have to compete in the short term for suitably trained service staff, the mechanics themselves could find themselves in a seller's market and so do quite well. For consumers the impact is not so awful since while the new car sales mix will change overnight, the actual mix of cars on the road will only change gradually. To get good service, consumers may have to change where they do business but the support will be there.

So just what does this government money (our money) accomplish? Buying habits aren't changed by the money, except to slow consumer abandonment of failing companies, which means job losses and factory closures will continue regardless. The workers still lose. Ultimately the money goes to supporting the companies' shareholders and, more significantly, their creditors who cannot so easy sell that debt due to its illiquidity.

Is buying a year or two of time to allow these companies to get their houses in order going to work when they have mostly failed to do so until now, and knowing their business choices were unsustainable? I am unconvinced. Let the market choose the eventual winners and losers.