Wholly printing press Batman!!!! The window at the U.S. Treasury is still open for business. Just a few weeks ago, Congress passed the unprecedented and quite controversial $700 billion bailout plan for the Financial Industry. Since then the market seemed to settle down and our financial institutions were saved from a so called “collapsed.” Unknown too many, Congress was also providing relief to GM, Ford, and Chrysler LLC with a $25 billion loan to assist them in retooling their manufacturing base toward small and economical vehicles. Wow!
Now just over a week from the completion of the 2008 Presidential Election, Congress and President-Elect Obama are talking about another bailout for our “beloved” auto industry. This time around dollar amount is extensively higher to the tune of $50 billion dollars. Unbelievable!!!! I can’t believe the Congress and the President-Elect are willing to give away taxpayer money to an industry that resisted altering their business model for the last 20 years. Guess what…that lack of denial has now come home to roost in Detroit.
I agree with most economist that a company the size of GM is too large to let fail due to the ramifications it could have on the economy – the enormous lost tax revenue, the increase in overall unemployment rate and fuel to this prolonged “Rescission” for several more years.
Here are some facts to give you an idea how enormous this industry is and what an integrated part of our economy this industry is. The automobile industry makes up four percent of the U.S Gross Domestic Product and 10% of U.S. industrial production by value. One out of every 10 U.S. jobs is auto-related.
Yes, it is a big chuck. However, shouldn’t the market dictate if these companies should survive or not. Bankruptcy laws were written and passed for this reason, to provide companies a shield to assist them in developing a better business model while negotiating for better leases, labor, etc. The goal is to emerge as a leaner and stronger company.
This option would be perfect for GM, Ford, or Chrysler LLC. Filing Chapter 11 Bankruptcy would provide the auto manufacturers the ability to take power back from the powerful outdated labor unions and negotiate a reasonable/fair market wages, close unprofitable factories, secure better/cheaper parts network, and reduce the dealership network to a more manageable number.
Believe it or not, filing for bankruptcy is a better option than using taxpayer money to keep afloat an industry that has a broken business model. What will keep the this industry from coming back to Congress a one, two, or five years to ask for another bailout.
Does anyone really think that this money being proposed by Congress would honestly be used to turn things around again. If you do, then I have some wonderful beach front property to sell you in Nevada. Remember, bankruptcy worked for the airline industry before and after 9/11.
If Congress and the President-Elect is willing to provide the auto industry money, what is stopping them from providing bail outs to other industries that are suffering from this economic down turn, bad business models, and/or high commodity prices like – the airline industry, steel industry, satellite radio, farmers, etc. Heck, how bout Circuit City? How can we let the second largest electronic retailer fail? Where will I get my fix of new Simpson DVDs?
If the Feds are willing to hand out money to any company that declares them as a bank a la American Express and Goldman Sacks, then I hereby declare that I am now a bank holding company. I am ready for my windfall of “lottery” money.” So let’s make a deal!!!”
With all seriousness, these government-sponsored handouts need to stop. The market is an extension of Darwinism – survival of the fittest. It is time for the Bulls and Bears to battle it out!
Our economic philosophy is based on Adam Smith economic model…not Karl Marx!