Among the arguments against buying and making SUV's are that they are dangerous to everyone but the driver; they use up far more gas than they ought to; using more gas increases our dependence on foreign oil and is going to turn northern Canada into a giant lake. There are humanitarian interests on a global scale at stake here. There are national security interests at stake here. But GM sought to line its pockets at the expense of these interests. Problem is that the market does in fact include those who are complaining about your products. It most surely includes those who are affected by the externalities that your product generates.
The LA Times blog article, Average mpg by car company, has some interesting news about the connection between fleet MPG and economic performance:
Now, back to those car sales figures. GM's sales declined 18%, Ford's fell 28% and Chrysler's dropped 36%. Toyota was off 21%, and Honda saw a 1.1% increase. Here's the average fleet mpg of cars by those manufacturers in 2007. And, not surprisingly, there's a correlation -- the manufacturers whose vehicles get the worse fuel economy also got hit the hardest sales-wise.
2007 model year statistics
Daimler-Chrysler: 28.6 mpg (-36% overall sales)
Ford: 29 mpg (-28% overall sales)
General Motors: 29.9 mpg (-18% overall sales)
Toyota: 31.6 mpg (-21% overall sales)
Honda: 33.5 mpg (+1.1% overall sales)
Daimler-Chrysler: 24.7 mpg (-36% overall sales)
Ford: 29.9 mpg (-28% overall sales)
General Motors: 31.9 mpg (-18% overall sales)
Toyota: 38.5 mpg (-21% overall sales)
Honda: 39.6 mpg (+1.1% overall sales)
Ford: 22.2 mpg (-28% overall sales)
Daimler-Chrysler: 22.6 mpg (-36% overall sales)
General Motors: 22.6 mpg (-18% overall sales)
Toyota: 23.9 mpg (-21% overall sales)
Honda: 25 mpg (+1.1% overall sales)
The above statistics cause me to have no desire to bail out the American manufacturers. Wait a minute, Honda and Toyota have plants in the US-- I should say to bail out the gas-guzzler manufactuers.
The issue also points out my beef with the recent Republican party. It is no longer the party of limited government, but it still is the party of opposition to social change. Environmental activists had been demanding government regulation to force US manufacturers to comply with demands about fuel economy. The Republicans, standing on a principle of economic liberty, refused. My fear is that a significant fraction of Republicans will join the chorus in calling for taxpayer-funded bailouts. And in so doing, they will once again demonstrate a significant shift in the overall philosophy of the party. The Republicans will have gone from a party that opposes regulations that force social change to one that uses government regulation and subsidy to oppose social change. Thus, they make the great leap from libertarian to mere evil.