Crash and burn: tough lessons for Canada’s auto retailers

By Roman Auriti

It’s hard to look anywhere today without being reminded about the looming economic crisis in the United States. We’ve all heard stories about how the American government has planned to bailout a number of banks with taxpayers’ money. Will Canada follow our southern neighbour and turn to taxpayers to do the same?

With 3,500 domestic auto dealers in Canada asking for bailout cash, it looks like Canadian taxpayers will be in the same boat. And with the prospect of a multi-billion dollar bailout– which means Canadian citizens could cough up more than $1,000 each– the stakes are high for the federal government to reach a conclusion that will appease both Canadian citizens and the Canadian automotive retail sector.

But do Canadian auto dealers deserve to be bailed out? Auto dealerships are businesses separate from their parent companies– Chrysler, General Motors and Ford in Canada. These monstrous corporations are just players in a game called capitalism, and as it has turned out, they’re on the verge of losing.

The basic principle behind capitalism is that it’s guided by a “hands off” approach, meaning that the government intervenes as little as possible to ensure that it keeps running. What runs through capitalism’s veins, keeping it alive, are two forces called supply and demand and injecting money into this machine really doesn’t fix anything.

Sure, some jobs could be lost, but the idea that bailing an entire economic sector out of bankruptcy with taxpayers’ money hardly sounds fair.

Actually, if the automotive retail sector is as important as they’re making themselves seem, then it shouldn’t be long until the economic vacancy is filled again by a more efficient generation of retailers.

If the Canadian government does decide that it will bailout automotive retailers, then the question of who else can be bailed out will come up. If individual retailers can have credit extended to them, then why not other individual businesses? If I complain enough, will our government give me money to pay off my expenses?

Capitalism is a system where there will be winners and losers. If the automotive industry didn’t invest their money wisely then it’s their own fault that bankruptcy is looming over their heads.

However perverse this seems, it’s been proven to be a very effective way of weeding out inefficient businesses and it’s important that we allow capitalism to run its course to let unprofitable businesses die. Especially ones that are asking for cash from ordinary citizens.

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