November 17, 2008

To: Members of the U.S. Congress
Re: Opposition to Automobile Bailout

Dear Member of Congress:

I write to urge you to reject any legislative proposal that would use taxpayer dollars to prop up Detroit automobile manufacturers. General Motors, Ford and Chrysler, have long operated under an unsustainable business model, and are in dire need of restructuring to stand a chance of becoming profitable again.

Just like the $25 billion bailout package in the form of loans passed earlier this summer, an additional bailout package for these companies does nothing to address the underlying problems they are facing.

Years of poor management decisions have left the former “Big Three” handcuffed by imprudent deals with the UAW, resulting in exorbitantly high legacy labor costs requiring them to pay roughly $20 to $30 more per hour on labor than their competitors. This burden is compounded by unaffordable employee pension and health-benefits plans. Failure to make structural changes and adapt to market realities over the last few decades have only compounded the problem, and high fuel prices and the economic slowdown this year were merely the final nail into the coffin.

At a time when taxpayers are already on the hook for a series of government bailouts, Congress must not allow the perpetuation of “moral hazard.” The recent string of interventions into the free market system has already set our country on a dangerous and treacherous path.

The idea that a government bailout can increase wealth is equivalent to the idea that you can take a bucket of water out of one side of a lake, walk to the other side of the lake and call a press conference to watch you pour the water back into the lake and announce your successful project to raise the water level of the lake. A taxpayer-funded bailout for Detroit automakers will only serve to maintain the untenable status quo, and delay the inevitable.

Rather than bailing out Detroit automakers with more taxpayer dollars, Congress should give these companies the opportunity to restructure under Chapter 11 by denying their request for a federal handout. This would allow them to free themselves from the grip of the labor unions and allow them to make the long overdue structural changes.
I urge you to oppose and vote against a bailout of the unionized automobile industry on the backs of American taxpayers.

Grover Norquist