Sunday, December 07, 2008

Krugman: US Auto Industry Will Probably Disappear

Nobel prize winner Paul Krugman (not pictured) says that the US auto industry will probably disappear. "It is no longer sustained by the current economy."

These days, other than iPhones, what is?

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

The reason the bailout won't work is because it's the business model of the Big Three that is causing their woes. They're losing billions. What will floating them billions of dollars do other than postpone the bankruptcy?

Meanwhile, the foreign automakers are operating in the same economy, but they have a better business model. And they build most of their cars here in the US. Same pool of workers, different outcomes.