A bail-out for Detroit?

The Big Three seem to think that they are troubled money center banks. They want Washington to get them out of their financial problems. According to The Wall Street Journal, "Battered by high gasoline prices and weakened earnings, the Big Three auto makers and their suppliers are now seeking significantly more help from Washington in the form of government-backed loans than the $25 billion they had previously been authorized to receive."

While the auto companies are important to the U.S. economy, they can be "replaced." If General Motors (NYSE: GM) or Ford (NYSE: F) fail, their brands and manufacturing facilities will almost certainly be bought by an overseas car company. VW has said it would like a larger market share in the U.S. So has Nissan. Both have the balance sheet to buy assets from a failed U.S. car company.

There is a sort of cruel reality to the thought that companies considered pillars of the U.S. economy could be gone sometime soon. It is certainly an indication that manufacturing is become less and less critical to the overall GDP of America. It is also a sign the the inefficiency of Detroit's habits have finally gotten so severe that it needs to turn to the government and not the capital markets for aid.

If the car companies cannot make it and cannot raise money on their own, they should be allowed to fail. That may mean that Toyota (NYSE: TM) will become the largest seller of cars in the U.S., but there was never any rule that said bad management would continually be rewarded.