The bailout of the Big Three U.S. car companies – General Motors, Ford, and Chrysler – cannot be expected to receive the same public support as did the last bailout.  People rely on a secure financial system to engage in transactions and maintain employment.  Even if they did not understand the underpinnings of the collapse, they appreciated the necessity of intervention.   The Big Three are quite different, however, because they supply non-necessary goods, given the availability of alternative transportation. If Congress bails out individual, goods-supplying firms, people reasonably may feel that Congress might as well launch its own “American Idol” television show to find the next struggling industry to bail out.  Furthermore, it is difficult to imagine that a bailout is the solution per se to the automobile companies. At best, the bailout will help them stay afloat for the next five to ten years; but, if they do not change their strategies, it will be money wasted. Americans are beginning to voice their frustration that the Big Three have been stuck in their ways for years and needed to change their strategic focus toward building products in high demand, like ecologically-friendly cars, to prevent this disaster.  In light of this developing general opinion, the bailout will very likely have a severely negative public relations impact on American consumers.  One compelling argument for Congress’s bailout of the Big Three is that it will prevent the fall of one of the significant symbols of American soft power. Professor Joseph Nye defines soft power as a nation’s ability to influence others through its ideas, culture, and way of life. The automobile industry represents a pillar of the American soft power. If the Big Three were to disappear, part of the visible U.S. culture around the world would follow suit. While it is an initially attractive argument, that line of reasoning leaves no end in sight for future bailouts.

The alternative proposal to the bailout is to force the Big Three to declare bankruptcy, similar to what K-Mart did in 2002.  Those in favor of the alternative praise the benefits of refinancing and the capitalistic cultural of survival-of-the-fittest.  Bankruptcy is a more viable solution than the bailout because it does not involve as much public money and gives the companies much-needed time to restructure themselves.  In addition, it allows the companies to renegotiate their contracts and, perhaps, regain some strength in the market.  There are compelling concerns, however, that refinancing will not be a realistic option for the automobile companies, given the current financial crisis.  Furthermore, opponents argue, there are too many American workers employed directly or indirectly by the Big Three to permit the risk of collapse.

The current framing of the automobile industry problem — bailout or bankruptcy — leaves out a third approach that largely avoids the concerns voiced over the first two options.  As stressful as the automobile crisis is, it is not a new problem to international markets.  Take Renault, a French car company, for example.  Instead of pleading for government aid when it faced collapse in the late 1990s, Renault fostered an alliance with the Asian car company, Nissan.  During that time, the world market for automobiles was witnessing its worst recession in 20 years, but Japanese competitors had a major cost advantage compared to Renault. Despite its financial mess, Renault had the significant advantage of major brand recognition in Europe. Together, Renault and Nissan focused on complementary markets (Renault in Europe, Nissan in the U.S and Asia), shared research and development efforts to more efficiently improve their cars, and in the long run decreased their costs through streamlining European car production. Since then, Renault Nissan has been very successful. Importantly, Renault managed to keep its brand alive as uniquely French. The success of this alliance is that Renault remained in business as a symbol of the French automobile.

There is ample evidence that Asian automobile firms are interested in acquiring the Big Three. In 2006, Renault-Nissan approached General Motors to create an alliance similar to the relationship they had developed in the 1990s. But it was quickly turned down by General Motors. In 2000, Mitsubishi and Daimler Chrysler tried to develop an alliance, but it failed due to both firms’ individual financial difficulties.  The Big Three no longer have the luxury of resisting foreign alliances without a coherent explanation to the American people.  By offering only two options of bailout or bankruptcy, the Big Three and Congress are misleading the American public into believing that successful compromises could not be achieved.  If the Big Three want to stay in business with the long-lasting support of the American people, they need to explain why they refuse to develop international alliances.