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Mirror Image: Star Trek and Lessons of the Detroit Bailouts

Posted Jun 16, 2009 04:41pm EDT by Aaron Task

GM's recent bankruptcy seemed inevitable to longtime followers of the auto industry. But Barry Ritholtz, CEO of Fusion IQ, believes it could have been avoided.

In his recent book, Bailout Nation, Ritholtz recalls an episode of the classic TV series Star Trek, "Mirror Mirror", in which Captain Kirk finds himself in an universe where everything has been altered ever so slightly.

Applying this concept to Detroit, Ritholtz asks: What would have happened if Chrysler hadn't been bailed out in 1979?

Had the government let Chrysler fail 30 years ago, it would have been a huge wake-up call to the managements of both GM and Ford, as well as the leadership of the UAW. Instead, all those players went on with business as usual, and maybe even put off making necessary changes because of the belief the government would bail them out too, if things got really bad.
 
We delve further into this theory in the accompanying video, as well as the outlook for the U.S. auto industry as GM and Chrysler restructure themselves and Ford seeks to overcome the competitive disadvantages of being a fully private enterprise.
 
You can read more about Ritholtz's views on this topic in Bailout Nation, for which (full disclosure) I was paid for my contributions as an editor.

65 Comments

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 16, 2009 04:53PM EDT

Interview RON PAUL!!!!!!!!

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 16, 2009 04:56PM EDT

The government needs to stick to defense and when I say defense that doesn't mean "world police". It means defense of our borders and nothing else.

Rude Beaver
Rude Beaver - Tuesday June 16, 2009 04:58PM EDT

Kirk should be president and let Detroit burn...

Free Texas 2012
Free Texas 2012 - Tuesday June 16, 2009 05:00PM EDT

Obama has changed the history and the course of the U.S. forever and for the worst. Obama - the first and the worst!

Ed
Ed - Tuesday June 16, 2009 05:03PM EDT

Fewer word of wisdom have I seen on all these blogs than those of Yahoo Finance user. Mr Obama: Get all of us health care, fix the bridges over the Mississippi and stop trying to be the world's policeman and creating democracies where they aren't really wanted.

John G
John G - Tuesday June 16, 2009 05:07PM EDT

Go to hell sore loser......leave the union out of it, the union is the people, common workers with no votes at shareholders meetings and the board of greed{directors}.....just check insidertrading for the last ten years and try to find a union person who take a bath in stock options. Old Rick made almost $1 billion in total salary......if you laid off all union workers and have no workers to build cars, they would save about $13 billion, out of $25 billion operating costs...go fly a kite.....people get what they can get, there are a lot better companies out there that take care of their empoyees....IBM for one, look at the DOW 30

Ed
Ed - Tuesday June 16, 2009 05:09PM EDT

Fewer word of wisdom have I seen on all these blogs than those of Yahoo finance user. Mr Obama: Get all of us health care, fix the bridges over the Mississippi and stop trying to be the world's policeman and creating democracies where they aren't really wanted. We really can't afford to do both.

Russell
Russell - Tuesday June 16, 2009 05:09PM EDT

Interview RON PAUL & PETER SCHIFF!!!!!!!!

John G
John G - Tuesday June 16, 2009 05:15PM EDT

Think Detroit burns, so will this country, and I will help them....I stand with the union, the people...if we have to burn down the japs..we will...the Hondas and the Nissans and toyotas plants can be taken down and sent back to Japan...the unions in Japan are a lot stronger than the ones in the free Amercia, in Amercia home of the free, we have about 25% union.....thanks for 8 years of anti-labor in DC,,,Bush the worst President ever!!!!

Buy On The Cannons
Buy On The Cannons - Tuesday June 16, 2009 05:18PM EDT

People need to get past the 'too big to fail' mentality. In all forms, that phrase is crippling. Look at what we have done, whom we have stuck the bill with for decades to come by simply by being afraid of what might happen when large companies die. Some financial happenings you just have to live thru versus attempt to avoid. AIG, GM, all else....it is wrong economically to save them and it is simply UnAmerican to prop up those that have failed. What a sad country we live in. What happened to the indomitable spirit Americans once had?

Jon M
Jon M - Tuesday June 16, 2009 05:21PM EDT

Bailouts were just a bad idea. The powerful helping out the rich. Just plain criminal.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 16, 2009 05:26PM EDT

Pleazze Mr Obamas...Gives us FREE health care. Gives us FREE cars...Gives us FREE tacos...Gives us FREE credick cards...Gives us FREE guverment jobs...Gives us FREE butt-wipe papers! Weeze all lazy in Amerika now...We tired of workin for a livin...We just want to stay at homes and bang on drum all day. We haves no pride left. We want Obamas guverment to take gud cares of us and gives us everthin! Dis is not your father's Amerika...We now called Handout Nation. We just sits around havin kids and drinkin beers and watchin Jerry Springfield shows. We have no shame...We wants it all and we wants it for FREE from Mr Hussein Obamas. He gives us everthin we wants. Let's just go ahead an re-eleck hims for 4 more years today? OK???

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 16, 2009 05:30PM EDT

I think some people are confusing a "special interest" with the "national interest" here.

Ray
Ray - Tuesday June 16, 2009 05:31PM EDT

We will still build cars but as I understand it the profit will leave the country to china and itlay at a greater rate than in the past.

mike
mike - Tuesday June 16, 2009 05:31PM EDT

Imagine a guy on a date travelling in an air car,. PUFF, PUFf,.. PUff,...Puff,... puf,.... pu,.... p,....... "Oh Darn,. we ran outta air,.."

Richard
Richard - Tuesday June 16, 2009 05:38PM EDT

John G - you want to put the workers at Toyota, Honda, and Nissan plants out of work? So you admit to favoring one class of workers over another? They're all the same - American workers every one. Except I guess that the Toyotas and Hondas are able to make money since they aren't funding pensions that are exhorbitant. I guess you and Obama are two peas in a pod. He's willing to place union workers above bond-holders (going against bankruptcy laws in the process) who actually risked their own money to invest in GM and Chrysler. Even if you agree with Obama's recklessness there's a severe penalty to be paid. Who in their right mind would ever want to invest their money in a car company again by buying bonds? Oh wait, there's not going to be a free-market system anymore. The government will simply funnel money from the profitable and send it to the unprofitable (i.e. tax Ford to pay the workers of GM). I for one will never buy a GM or Chrysler product until the government eliminates any ownership position. It's horribly unethical the way it stands now.

nick
nick - Tuesday June 16, 2009 05:39PM EDT

The Fed Govt needs to focus on Infrastructure, Military, Diplomacy and Education. We need to nuture the technolegies of the future. and dump all of this socal fairness crap off onto the states. That way people can vote by moving. You want universal health care find a state that has it and move there. You want Free education find the state you like and move there.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 16, 2009 05:42PM EDT

I'll never buy another UAW-built car again. I am tired of subsidizing the lazy UAW workers.

Richard
Richard - Tuesday June 16, 2009 05:43PM EDT

John G - you want to put the workers at Toyota, Honda, and Nissan plants out of work? So you admit to favoring one class of workers over another? They're all the same - American workers every one. Except I guess that the Toyotas and Hondas are able to make money since they aren't funding salaries and pensions that are exorbitant. I guess you and Obama are two peas in a pod. He's willing to place union workers above bond-holders (going against bankruptcy laws in the process) who actually risked their own money to invest in GM and Chrysler. Even if you agree with Obama's recklessness there's a severe penalty to be paid. Who in their right mind would ever want to invest their money in a car company again by buying bonds? Oh wait, there's not going to be a free-market system anymore. The government will simply funnel money from the profitable and send it to the unprofitable (i.e. tax Ford to pay the workers of GM). I for one will never buy a GM or Chrysler product until the government eliminates any ownership position. It's horribly unethical the way it stands now.

Spidey
Spidey - Tuesday June 16, 2009 05:44PM EDT

Bypass the bull, go to Youtube and look up HHO. make your own gas. Don't wait till its too late

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