Loan, not bailout, to automakers is worth the jobs it would save

Let’s set the record straight on the proposed auto bailout.

It’s a loan, not a gift. And, there is precedent. In 1979 Chrysler asked the government to guarantee loans to stay in business. The government added stipulations. Chrysler repaid the loans seven years early and paid interest to the taxpayers.

Other automakers have made mistakes as well. Several Asian automakers introduced huge, V8-powered pickups and SUVs hoping to cash in on America’s seemingly insatiable demand for SUVs. When gasoline prices rose, SUV sales slowed. Gas prices came down and SUV sales resumed. Much of the blame for the industry’s troubles lies with us. We kept buying SUVs, and the manufacturers kept building them.

Those who have been braying against the bailout must not have been following the industry for the last several years. The Detroit automakers have cut, chopped and restructured their operations. Here in Atlanta we have two closed manufacturing plants as General Motors and Ford have restructured. Here’s the point: Both Ford and GM had reported several periods in the black (Chrysler doesn’t report financial results as it’s a privately held company). It was expected both would be very solidly in the black within a short time.

The financial collapse brought on by poor management by giant banks strangled credit, the lifeblood of the retail auto business. If people can’t finance cars they don’t buy cars. If dealers can’t sell cars they can’t buy cars from the manufacturers.

If one of the Detroit automakers declares bankruptcy you can be sure sales will stop for that manufacturer. Not slow, but stop. Some have said people won’t believe the manufacturer is going out of business, but any prospective customer will not put money on the line with a bankrupt manufacturer. Dealerships will close. These are local folks who are a large part of our community.

Some have said that when auto companies like Packard and Studebaker went out of business others picked up the slack. True. But this time it’s all the U.S. automakers, a big difference from the 2 to 3 percent of the market each of those manufacturers held.

Thousands and thousands of people would be out of jobs if these companies fail. Thousands and thousands would be out of health care. It would be a catastrophe.

Guaranteed loans saved Chrysler and kept thousands of jobs for many years. A loan to Detroit will save thousands and thousands of jobs for many years to come. A loan of $25 billion would be a very wise investment.

• Michael Canfield lives in Atlanta.