Fix it again, Barack — VOICES for REASON

One way in which the central planners of the Obama administration easily acquire and exercise the power to dictate how a 300-million-person economy should run is by portraying entire industries as stupid, short-sighted, and in need of “adult supervision.”

Recall how the administration overrode bankruptcy law to hose Chrysler creditors, denying them their rightful say in the company’s fate — and instead handed the company, and billions in government money, not just to the UAW but to Italian company Fiat for a price of zero dollars. They portrayed Chrysler and other automakers as having stupidly neglected small, fuel-efficient cars in favor of larger ones (in fact, government-mandated small cars had killed the profits of UAW-hamstrung automakers, while larger, consumer-friendly cars were genuinely profitable). By contrast, it was treated as self-evident that if they would only be acquired by a sensible, small-car dynamo like Fiat, they could become the car company of the future.

This narrative should have raised the question: If Fiat is such an amazing car company, and a slam-dunk merger prospect for US struggling automakers, why didn’t these automakers pursue such a profitable opportunity?

The likely answer is not that these companies were just stupid. A recent Wall Street Journal story reminds us of a fact that was coincidentally omitted during all the Obama hoopla over Fiat: Fiat already tried entering the US once — and its cars bombed so badly, with such a bad reputation for quality, that the company’s letters came to stand for: “Fix It Again, Tony.” “Fiat Hopes Second U.S. Try Is Winner” documents the failures of Fiat in the past, and talks about the company’s struggles in the present.

When Fiat SpA entered the U.S. market in the late 1970s, the Italian auto maker thought it had the answer to that decade’s gas crisis: a fleet of small, fuel-efficient cars.

The debut, however, became a debacle as Fiat struggled to set up an efficient dealer network and complaints about quality piled up. Fiat was forced to exit the U.S. market in the early 1980s, dogged by the nasty acronym “Fix It Again, Tony.”

The article also includes some pictures of Fiat’s models, which to this blogger, at least, do not appear to be market winners in the US-a country without government-created $8 a gallon gasoline.

The point here is not to slam Fiat, but to slam the idea that there are easy fixes to industry-wide problems that Barack Obama (or the random 31-year-old wonk who is now steering the auto industry) has the wisdom and the courage to see. When an industry as a whole malfunctions in this way, we should look to the far-reaching, destructive effects of government intervention, conceived by past wonks, that undermines productive behavior and rewards unproductive behavior. The solution, for the auto industry and others, is simple: remove the toxic presence of government “planning” and leave the industry free to produce and profit.

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image: cc attribution Flickr/mark78_xp