Local economist weighs in on possible auto bailout

Local economist weighs in on possible auto bailout

By ANN KEIL
6 News Reporter

KNOXVILLE (WATE) -- Officials with Ford, General Motors, and Chrysler all warned Congress Tuesday that without a bailout they could face millions of job layoffs.

But a local economist told 6 News there is no guarantee that $25 billion would keep that from happening.

"Are we simply protecting and perpetuating inefficient businesses," says Dr. Bill Fox,  a UT economist.

Fox said he believes a federal loan might not be enough to save the three U.S. automakers that apparently can't compete and thrive in today's economy.

"Even if they didn't get the money, my bet is they don't go out of business. They go into bankruptcy and they operate out of bankruptcy, and they make changes," explained Fox.

In other words, Fox argues, job loss is inevitable. Whether it's through a bailout or bankruptcy, the automakers will need to restructure.

"If the jobs are not viable or if the incomes are too high for the value of what's going to be produced, then these are changes that need to take place," Fox said.

He also warned that any bailout not linked with standards that would make the automakers more efficient would be a waste.