Ryder

With all this talk about giving huge subsidies to US automakers, it might be instructive to see how successful these efforts have been in the past. Most famously, we have the loan guarantees made to Chrysler in 1979. Although these are popularly thought of a success, the verdict is mixed and certainly they are back to the brink 30 years later. Would we be worse off if Chrysler had ceased to exist in 1980?*

A little lesser known is the British experience in the 1970s. In 1975, the Ryder Report was written outlining a series of steps to save British Leyland and massive (at the time) subsidies were duly issued. After struggling for many years, the rump of this company declared bankruptcy in 2005.

The chart, created using data pulled from the UK's National Statistics Online, shows UK vehicle production for the past 20 years (approximately from the time of the subsidies). Keeping in mind that most of this production is now foreign owned, what did the subsidies really buy them over the long term? How do we know our experience will be different?

A bankruptcy is a healthy thing in an economy because it allows capital to be reallocated to better use. Allowing zombie companies to exist without profits forever does not promote the "creative destruction" necessary for economic growth.

If we are going to do any specific for the people impacted, I would much rather see our monies spent on helping workers that get hurt by the very real potential of Big 3 bankruptcies. With proper retraining and relocation assistance, we could help our economy re-channel the capital and labor trapped in uneconomic activities towards future growth.

*As a side note, we own a Chrysler that I'm quite happy with, but the point remains.