Be careful with auto bailout

Detroit automakers want more help from the federal government. Whether Congress should authorize another $25 billion in loans is a complicated issue. Congress must weigh this request very carefully.

Auto industry officials say 2.5 million jobs would be lost in the coming year if Detroit automakers cut domestic operations by half. Some 250,000 of the jobs would come from the car manufacturers, some 800,000 from parts suppliers and an estimated 1.4 million other jobs from a ripple effect throughout the economy, according to the Center for Automotive Research. Some of those jobs are in Utah.

Supposing those numbers are accurate, the collapse of the auto industry would be a substantial blow to the nation�s economy. Yet, American automakers have been bleeding slowly for decades. For a number of reasons, the automakers failed to evolve in a manner that enabled them to compete with international automakers. Current economic conditions quickened the pace of the hemorrhage.

What ought Congress to do? Would these loans, indeed, provide a fix for this industry, or would they merely postpone the demise of these companies or hasten a sell-off to more nimble nonunion competitors such as Toyota, Nissan and Honda that also operate in the United States?

The automakers not only have the problem of slumping auto sales, they have been saddled with escalating health-care costs. Plus, they have heavy pension obligations that somehow need to be met.

As automakers shutter plants and burn through cash just to stay afloat during the worst economic downturn in many years, one has to wonder if a second $25 billion loan would be sufficient to preserve the industry. If not, does it make sense to extend the first round of loans to manufacture automobiles that have greater fuel efficiency? Is it just too late to salvage these automakers?

Even if the loans materialize, would consumer confidence improve enough that people would buy new cars? Would banks and credit unions lend to them when they want to purchase new cars? Would consumers want the cars GM, Ford and Chrysler produce?

Automakers will want Congress to move fast on this request. That makes some sense. But Congress should not open its purse — filled with our taxpayer dollars — without asking a lot of pointed questions.