Tuesday, November 18, 2008

Of Cars and Bailouts

I once heard Joss Whedon discuss the themes of his Buffy the Vampire Slayer series. He said that the one lesson he tried to explore through the entire series was that our choices have consequences. This is a lesson managers of GM, Ford, and Chrysler, as well as Congress and the UAW would do well to learn. Upper Management at GM, Ford, Chrysler, and the UAW are all begging Congress for a bailout. They are looking for a loan of around $50 Billion in addition to the $25 Billion Congress has already made available for them in the form of loans for changing equipment at their factories.

I own a GM vehicle. Today I received an email from GM asking me to contact my representatives and ask them to vote for a bailout package for the auto industry. It is important to point out, there are a number of car manufacturers here in the United States that aren't looking for a hand out, and don't want their competitors getting tax money these better run factories have paid to the government. I think they have a good point.

GM, Ford, and Chrysler aren't looking to change their practices. They are looking for free money. Imagine if a company came to your house one night and asked to borrow money from you because they were on hard times. The company had a history of not turning a profit, said it stood behind its management team and their decisions, insisted on making no major changes to their operations, and wanted you to give them $75 Billion to let them keep their doors open for a few months. What would you say?

Some have argued that the big three are in this situation because of the Unions. I agree that the UAW has some share of the blame, but so does Congress, and the car manufacturers themselves. Congress has long believed they are automotive engineers and have mandated an assortment of standards that they themselves probably can't explain how to obtain. Congress is good at throwing money at problems, but not so good at coming up with real solutions.

George Will points out today that there is a very good solution for these automakers: Bankruptcy. The companies would be forced to restructure and reorganize. They would be able to renegotiate the bad contracts they have currently have with labor. As Mr. Will points out people who have retired from these companies, but are too young for Medicare, might lose their health insurance. That is OK. If they are that young, they can probably find new work. Some argue these automakers are too big to fail. Mr. Will points out they have already failed. The thing to do now is to see if the auto makers can restructure their company for success.


Anonymous said...

The trumpets sound.

The angels sing.

I agree with Andy on everything here!

Cheers, bro.

Andy D said...

Mitt Romney has a very good article today suggesting what we should do with the auto industries. It starts out:

"IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed."