About a week, week and a half ago I sat down to knock out a quick comment about the fact that Ford, Chrysler, and General Motors went to Congress to argue that they needed, and were entitled to, a $25 billion slice of the federal bailout pie. I figured it would just take a couple of minutes, once I double-checked some numbers and some history. Which ended up casting enough doubt on my thoughts about it that I decided to do some more research. I've put about another 30 or 40 hours of reading and research into it since then, because everything I read raised more questions. But it's gone to good use, because I did come to one absolutely firm conclusion about the hypothetical federal government bailout of "the Big Three" automakers:If you have a firm opinion about whether or not there should be a bailout, you don't know enough to be entitled to an opinion.No, really, there's a reason why it's the dumbest and shallowest of pundits who rushed to have opinions on this, they and the people who have knee-jerk political philosophies that could fit comfortably inside a walnut, so they always know what they think should be done: the same thing they always recommend, no matter what the problem is. Very few people who actually know anything about the auto industry have spoken up, and there's a reason for that. Heck, when the Detroit execs were sent packing by Congress with an invite to come back and explain how, exactly, a bailout would even work? You'll notice they haven't exactly rushed to answer.Here, let's start with some history, just to confuse things beyond all recognition. (Yeah, I know, that's not what history is supposed to do. This time it does, though.) Starting with the World War II temporary wage and price freezes, the American auto industry got into the habit of competing for the best workers by persuading them to accept deferred compensation. They voluntarily signed contracts that said, "instead of drawing x+y salary now, we'll pay you x now, and invest y in something nice and safe, and when you retire, we'll pay your salary and your health care benefits out of what we earned on y." Lots of industries did. Then they got stuck writing those contracts for year after year, because they faced open revolt if new workers didn't get the same offer that their prior co-workers got. But it was okay, because at the time, retirees lived for only a couple of years, and by then, they were dying of things that we really couldn't do anything about. It's not like it cost all that much to provide those benefits.And then something completely unexpected happened: modern medicine. Average lifespan went up 10 years. Worse, we suddenly had something more than rudimentary surgery, splints, crude painkillers, a few cheap vaccines and antibiotics, and a lot of colored sugar-water placebos. Because of the revolution in molecular biochemistry, the cost of health care went from just the cost of the doctors' and nurses' labor plus a few bucks up into "the sky's the limit." Company after company went through this, and company after company found legal or illegal ways to break those contracts 20 years ago or more, because it was that or go completely under. So far, because of the strength of its political connections to both parties and because of its central place in 20th century American cultural mythology, only one industry has managed to keep that old tradition alive, and that's the auto industry. But it's been killing them. And everybody knows it.Worse, when Honda, Nissan, Toyota, and Hyundai came to America, they found that workers all over the (then depressed) Sun Belt were in fact perfectly happy to sign contracts for hourly wages that were pretty similar to Detroit's with no pension to speak of and no retiree health benefits. Basically every worker born since 1960 or so has known that when they retired, what they were going to have was whatever their own private investment accounts had in them (if anything) plus Social Security and Medicare. If even that, say the cynics. And it's not particularly scandalous, unless you're a Baby Boomer or before. And what that meant for the "foreign" auto makers making cars in America is a cost per car difference in the several thousands of dollars per car. Everybody picks on Detroit for "sticking with SUVs when everybody knew that they weren't sustainable." You think they're stupid? Never mind that, of course you do, everybody does. Now explain this to me, if you're so much smarter than them: where were they going to find a market for millions of subcompacts that would still have to sell for at least $30,000 to be profitable? They've known for years that the SUV market was going to collapse some day; they rode that ride as long as they could because those were the only cars left that GM, Ford, or Chrysler could make that had enough profit margin to cover the cost of retiree labor.So they're screwed, right? Not so fast. They actually solved this problem. Do what I did, spend some time with the most recent GM annual report, and cross check its numbers with the presentation on the 2007 contracts of the Big Three at the Center for Automotive Research website. GM says that they got enough concessions out of that round of contracts that even with the retiree costs, they would have been actually profitable in 2007 if they'd had that contract the year before. They show numbers that (if it weren't for the huge drop-off in demand due to the financial industry crisis, which the annual report failed to forecast) that if they could just hang on until 2010, enough of the retirees would finally have died that even those costs would be gone. They actually have, or at least had, a plan that would have let them squeak by on selling overpriced SUVs to cover the costs just long enough, they hoped, to be competitive with the other four semi-American automakers in all product lines.So we should save them, right? After all, there is one thing that none of the semi-American automakers can offer, if nothing else: upward mobility. Somewhere in America right now there's a future hotshot auto designer, auto engineer. A century of tradition, both US and non-US, says that where he should be (and probably is) right now is working in an auto plant, working his way up. Can an American work his way up to being a lead designer for Toyota, Nissan, Hyundai, Mitsubishi, etc? Not unless he speaks fluent Japanese (or Korean). And given the famously virulent racism of most Japanese towards non-Japanese, probably not even then. And if we can just keep them afloat until a few thousand more retired autoworkers die of old age, we can save those jobs, right?Maybe not. Because there's one other pair of numbers staring us in the face, and they're not going away. Fact number one: auto manufacturing plants in the United States produced slightly more than ten million new automobiles in 2007. Fact number two: the American people bought about seven and a half million new automobiles in 2007. (That's more than my back of an envelope estimate was, I'm actually kind of surprised. I guess the pre-collapse economy was pretty good.) That's not counting exports, or imports, but we're not going to export our way out of that almost three million car per year surplus (and more than that, this year). There just aren't that many people around the world who can afford $30,000, or $40,000, or whatever SUVs. Or American cars at all, really. We thought we were going to export our way out of this by selling half a billion cars to China, but the Chinese people can't afford to buy cars made by people making American wages, so they buy cars made by (for example) GM's China subsidiary. We thought we were going to export our way out of this by selling hundreds of millions of cars to India, but they buy $2000 econo-boxes from local Tata Motors instead, and one heck of a lot of cheap third-world knockoffs of Japanese scooters, because that's what they can afford. And this isn't exactly news, either. The Big Three have been renting every flat surface within a hundred miles of Detroit, practically, to park unsold cars on, for at least two years. Starting this year, the non-Big-Three companies have been doing the same thing on and around the Port of San Diego, and maybe elsewhere.The fact of the matter is, unless wages somehow magically go up for a billion peoplego up so far they can afford American-made cars, pretty soon we're not going to have any alternative but to shut down 1/3rd of the automobile factory jobs in America. And that's perhaps an optimistic scenario, that's assuming that Americans don't start buying cheap econo-boxes from Tata Motors, too, if that becomes all that they can afford. And Ford, GM, and Chrysler have knownfor years, too. They don't say, but it's pretty obvious what they were hoping to do: delay the inevitable long enough that they were actually economically competitive with the newer companies' factories, hoping that all seven of the big manufacturers in America would each have to shut down 1/3rd of their production, instead of losing 1/3rd of the companies. But at least two of those companies run out of money to make the payroll with in at most a couple of months, so they don't have three years any more.If you think you know for sure what we should do about that? I suspect you're wrong.