Saving Detroit — Or Not

“Even when people set their own houses on fire, we still dial 9-1-1, hoping to save lives, salvage what we can and protect the rest of the neighborhood.”

–Bob Herbert, “‘Drop Dead’ is Not an Option” (The New York Times; 11/15/08)

Great analogy, but Herbert doesn’t push it nearly far enough in making his case for why Washington should come to Detroit’s rescue.

When an arsonist torches their own house, do we really write them a check — or give them a loan — for 50X its market value? General Motors’ market value today is less than $2 billion; the amount being bandied about as part of any rescue effort, including sums already disbursed, is around $100 billion.

If the house in question was structurally unsound — and in fact, condemned — would you still risk men and materiel to extinguish the blaze?

Even if the house was once grand, and may still have good “bones,” do you really ignore all the smoke and water damage, and try to re-build, regardless? What if the owner, to save money, had skimped on things like maintenance and insurance — or quit paying the premiums altogether? And the surrounding block is full of other, nicer homes that are also for sale?

Oh . . . and once the fire is put out, what does society do with serial arsonists??

*Actually, there’s an even better analogy than arson to explain how the house caught fire: the owner was carelessly making “meth” in the basement — and had bribed the police to look the other way!

Financially, geopolitically, environmentally, and yes, morally, gas-guzzling SUV’s like the Hummer were the automotive equivalent of “meth.” Congress steered clear because of Detroit’s lobbying clout.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.
2 Responses
  1. Anonymous


    It’s an interesting analogy comparing Detroit’s big 3 to meth manufacturers. While I agree with your general theme that the Federal gov’t shouldn’t bail out the old line car manufacturers, I don’t think producing gas guzzling vehicles has any equivalence to producing methamphetamines. While many of us, including myself, find big gas guzzling SUV’s idiotic, there is nothing illegal or immediately harmful about them. If people want them, someone is going to fill the need and make a profit producing them. Also, I think the implicit message in the meth comparison is that gov’t should have prohibited the production of the gas guzzlers. That is something I don’t believe is within the scope of powers our founding fathers intended the federal gov’t to have. That’s a very nanny-state sort of position, and as far as I’m concerned, let’s leave that crap over in Europe. I can’t blame the big 3 at all for filling a want. That’s how profits are made. I think the big 3’s problems preceded the heyday of the SUV’s. These problems include untenable union labor contracts, and an inability to produce small and midsize passenger cars that people want to own. The fat years of profits from producing the gas guzzling SUV’s likely just delayed the ultimate day of reckoning for the big 3. $4/gallon gas exposed Detroit’s highly flawed business model and has brought all three companies to the precipice of bankruptcy. An intelligently managed chapter 11 bankruptcy workout is probably the best thing that could happen to these companies.

    Charley S.

  2. Ross Kaplan


    The analogy isn’t perfect: manufacturing meth is and always will be illegal, while SUV’s were always within the law.

    However, there clearly is some interplay between incumbents’ political agendas and the laws Congress enacts.

    The best example with respect to Detroit are the Corporate Average Fuel Economy (“CAFE”) standards, which directly bear upon SUV’s.

    Once upon a time, Detroit was supposed to have committed to incrementally higher fuel efficiency. However, those standards have been continuously weakened and deferred, pretty much as a direct result of Detroit’s lobbying efforts.

    Perhaps the moral of the story is, “be careful what you wish for.” An SUV-addicted Detroit is now desperate for a bailout in part because their product lines are obsolete.

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