AFP today sent the following letter to every U.S. Senator and Representative urging them to oppose a bailout of the auto industry:

November 17, 2008

Dear Representative:

On behalf of the more than 270,000 members of Americans for Prosperity, I’m writing to encourage you to not use any taxpayer dollars to bail out automobile manufacturers.

A lot of people in Washington seem to have forgotten that for free-market capitalism to work, there must be consequences for poor decision making. And the unfortunate fact is General Motors, Ford, and Chrysler have been poorly run for years.

Saddled with sky-high labor costs imposed by sweetheart United Auto Workers deals, crushing health and pension burdens, and outdated management practices, these companies have been struggling to compete with companies—many of whom build their automobiles here in the United States—that are better run and have more rational cost structures.

For example, as economist Dr. Mark Perry has noted, total compensation for Big Three auto workers averages $73.20 an hour, while their counterparts at Toyota average $48.00 an hour. This kind of skewed compensation is simply unsustainable in a real economy, and taxpayers should not be forced to bail out any company that engages in it.

In addition, connecting any bailout to mandates that automakers manufacture more politically correct “green” cars – which are more generally expensive to produce, technologically not ready for primetime and of very limited interest to consumers at this point – would only make manufacturers even more uncompetitive in the global marketplace. Using taxpayer dollars to make an unsustainable business model even more unsustainable is obviously not the answer.

Instead of a bailout, the Detroit Three need wholesale restructuring, including bankruptcies to free the enormous assets that they possess from their crushing liabilities and put them to more productive use. Bankruptcy would not mean they disappear, but simply that they restructure in a more rational way, as the steel and airline industries before them have done.

A taxpayer-funded bailout of the auto industry will set a precedent that every company in every industry should line up for a federal bailout in bad times. It will keep these ailing companies limping along, delaying the inevitable while throwing billions of dollars of good taxpayer money after bad.

We therefore urge you to oppose an auto industry bailout.

Sincerely,

Tim Phillips
President
Americans for Prosperity