The U.S. Auto Industry Under Duress: Fit, or Finished?

John Kwoka, Nov 01, 2009

In the latter half of the 20th century, the U.S. auto industry truly lost its way. It squandered its competitive advantage, allowed itself to become vulnerable to forces beyond its control, lost its markets one by one to foreign rivals, and stared into the abyss of its complete demise. Only U.S. government intervention on a previously unimaginable scale prevented that outcome. A great debate emerged over the causes of the auto industry´s collapse, the rationale for government intervention, and the effects of competition between government owned and private auto companies. That debate was leapfrogged by events that forced decisions about intervention and ownership. But events have not obviated the need for examining these questions, since the U.S. government is now even more deeply involved in the U.S. auto industry. In addition, this experience may serve as a model or argument for other troubled sectors. This paper seeks to cast light on some of the issues raised by government intervention.