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Should we nationalize the Big Three?

As lawmakers debate a bailout package for the troubled Big Three automakers this week, we're seeing a word rarely spotted north of Venezuela or west of Scandinavia: nationalization.

By Blogger for The Christian Science Monitor / December 9, 2008

Auto-industry workers and supporters demonstrate outside the San Francisco office of Sen. Diane Feinstein (D) of California on Saturday.

AP PHOTO/RON LEWIS

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As lawmakers debate a bailout package for the troubled Big Three automakers this week, we're seeing a word rarely spotted north of Venezuela or west of Scandinavia: nationalization.

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Last week the Los Angeles Times ran an op-ed by Pulitzer Prize-winning automotive writer Dan Neil, unambiguously headlined Nationalize GM.

An outright federal government purchase of GM would have many benefits, argues Mr. Neil. A state-owned General Motors would be able to quickly void onerous contracts. GM is already competing with companies abroad, like Honda and Toyota, that are already quasinational, what with their government-provided healthcare and pension plans. And Uncle Sam could avoid many of the strategic failures – such as betting on SUVs instead of hybrids – caused by short-term, quarter-to-quarter thinking.

A state-run GM could help the US transition to cleaner cars and trucks. Neil writes:

We need government-sized automotive help anyway. This country should be putting millions of plug-in hybrid and electric vehicles on the road. As far as I can tell, without big subsidies, there is no way in the near term to build these vehicles and make a reasonable profit, due to the stubbornly high cost of advanced batteries. Besides, if GM were owned by the government, it wouldn't spend time and money litigating and lobbying against clean-air and safety rules.

Almost as an afterthought, Neil adds that the government should take over Ford and Chrysler, too.

Neil is not the only one calling for a government takeover of the Big Three. NYU economist Nouriel Roubini, who in 2006 accurately predicted that the US subprime mortgage crisis would balloon into an economy-threatening credit crisis, has also called for a temporary nationalization of Ford, Chrysler, and GM.

We might even make a buck at it

A government takeover might not be as expensive as it sounds – especially considering that the real price tag may not be the $34 billion now being bandied about, but more like $75 billion to $125 billion. FireDogLake blogger Ian Welch, who advocates nationalizing Citibank and GM, notes the relatively low upfront costs and potential windfall of a GM buyout:

Buy out the shareholders for the $3 billion their shares are worth, or hey, be generous and pay them double – $6 billion.  In the current context, that's not even real money.  Get the best auto people in the world and have them go in and restructure GM.  Spend the necessary money and make the necessary cuts.  Restructure the company to serve America's interests – get the Volt working, increase mpg ratings, restructure the dealer network.  Do it all.  Fix the company and make it viable again.  Then, once it's working again in a few years, start selling it back to the private sector.  Do it right and the government will make a significant profit.

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