Now that the election is over the media has turned their focus to our nations failing automakers. It seems these automakers are asking the government to bail them out, just as they have been bailing out financial institutions and AIG. I wasn’t in favor of the original bailout package, but I could see some of the justification behind it. Our financial institutions and the credit they provide to businesses and consumers are the backbone of our economy. People need to be able to borrow money and feel that their money is safe when they deposit it at a bank. I get it.
Our automakers are a different animal all together. Sure, the automakers provide a lot of jobs and fuel a ton of spending, but the product they provide is available through other means. There are plenty of automobiles to choose from in this country and not every automaker is struggling. This is what capitalism and free markets are all about. Companies that manage themselves well, provide a quality product and deliver for their customers earn the right to survive. Those that fail to do so do not. End of story.
The government should not keep companies artificially afloat. Companies must make money to stay in business or have investors who believe in funding the future. If private and commercial money won’t invest more in a company there is obviously something wrong. I have no desire to “own a piece” of these companies through my tax dollars. If I wanted to own a piece I would go out and buy some stock on the open market.
All that said I do believe our auto makers need help. However, that help should not come through a bailout, rather it should come through the mechanisms already in place to deal with such a scenario. The auto makers should file Chapter 11 bankruptcy. Chapter 11 will allow them to strike deals with creditors, eliminate unnecessary labor and restructure their companies. The investors, management and employees will be accountable for the failure and reinvention of these companies, not the federal government.
If these companies survive great. If not I am not worried… let them die. There are plenty of startups out there looking to take their place. Those startups will create new jobs and new economies of their own. Have you heard of Phoenix or Tesla Motors?
The restructure needs to focus on earning the U.S. consumer’s business. People don’t buy American cars like they used to because we have been getting our tails handed to us by foreign manufactures. It’s time for the big boys to step their game. If our automakers are going to be successfull long term they need to start making quality, innovative, fuel efficient vehicles. Show me a quality electric truck and I will be the first in line to buy one… and some shares.
I agree, we should let them die or restructure. Unfreezing the credit markets is one thing, but this is a different beast. If they had innovated instead of pumping out SUV’s they wouldnt have this problem. If you have a nytimes.com login check this out:
http://www.nytimes.com/2008/11/12/opinion/12friedman.html?_r=1&hp&oref=slogin
Automakers got themselves into this as did the banks. Now they are looking for a quick way out and not be held accountable for their bad decisions. DO NOT bail anyone out !!
We the consumers are the ones who will pay in the long run. We are the ones who need protection.
You are so right. If the government keeps on anyone will be asking for a payout. As many have said, I think if the government is going to support business the best way is to give each 21 yro and above x thousands of dollars (not 2 or 3 more like 500 or 600), have them pay tax on it getting back part of their money, enforcing a “no-credit” purchase and the economy will flourish because individuals will pay off their own mortgage, buy new cars, etc.
“People need to be able to borrow money and feel that their money is safe when they deposit it at a bank. I get it.” Quick question: how safe do you feel when the banks that you trust go under? These are the same banks that make you pay for them to use your money to enrich themselves. I don’t get the bailout…unless it means the banks pay out to all their personal clients.
Anyway, I’m 100% behind you when it comes to not bailing out private sector business like the auto-manufacturers. Private corporations can’t be allowed to bend or flout regulations and common-sense business practices in the pursuit of profits without experiencing the consequences. If the government bails them out then it’s just a prop-up of a vicious circle that will inevitably end back at the Chapter 11 filing.
Better government should buy them out, nationalise until they’re breaking even or showing profit and then sell them back to the private sector at cost (and recoup through taxes).
My 2c worth (although in the current recession I’m not sure it’s worth that much in real terms).
I thought the markets were going to soar if we elected Obama. At least that’s what MSM’s pundits and talking heads were saying.
As for the bailout, I’m a little bitter. A previous administration promised to stop illegal steel dumping so that our domestic steel companies could compete fairly. We didn’t want a bailout, just a level playing field. We didn’t get it and I watched entirely too many friends, family and neighbors lose everything in the 90s while the rest of the country prospered.
I have no sympathy for the auto makers and no confidence in government to fix anything. My broken record response: Get government out of the way so we can all pursue our own dreams.
I agree with you and so does another Ted, Ted Turner:
http://www.youtube.com/watch?v=wAQRdV0AyDU
thanks for the comment, and I agree.
AIG, somewhat necessary. An extra few billion to top at 150bn? Not really. But automakers for sure.
@Marisa – i’m not really sure where you heard that the markets were going to soar – but Dems are never good news for the markets. The only help he’ll provide is boosting consumer confidence and bringing some sort of sensibility to the government. I hope.
I agree with you Ted, propping up failing companies is less than ideal.
However, before I rush to choose a side, I’d like to understand the true impact to America if the big three fail.
It is my understanding that if GM folded, it would cost the US approx. 2 million jobs. That’s alot of people out of work and ALOT of tax dollars spent on unemployment.
Lets hope our leaders make decisions based on the health of America and not choose a course simply because it’s the capitalist thing to do.
As a side note – Just a week after taxpayers bailed out AIG, the company spent $440,000 on an executive retreat. What are you thoughts on this?
@Nate:
Yes, Nate. I realize that. I’d tell you exactly which Left-leaners made those types of statements but every time I heard/read that garbage, I changed the channel or clicked away from the site.
As for government sensibility, that’s only if he moves toward the center. Spreading the wealth is anything but sensible.
Ted, I understand your logic, and that’s the view I would normally have.
However, if you look back to World War 2, one of the reasons the US won was our manufacturing base. It was companies like GM and Ford that built all those tanks and planes and other heavy equipment that were critical to winning the war.
If the US car companies go under, who is going to play that role when there is a major war? This is a national security issue.
The car companies are not totally to blame. They have been screwed by unions and have a huge competitive disadvantage with all the benefits they’ve promised to pay. Excessive govt regulation has not helped either, or the unfair trade agreements where cars coming into the US have low tariffs, but into other counties have high tariffs.
Notice the foreign car makers with US factories do NOT build them in the UAW states like Michigan, but in right-to-work states where they don’t have to put up with that union nonsense.
And before you think I’m anti-worker, my dad worked in a car factory for 30 years. But he’s dead now, so I don’t have a direct stake in the fate of those companies.
@Jeremy Hilton:
“It is my understanding that if GM folded, it would cost the US approx. 2 million jobs. That’s alot of people out of work and ALOT of tax dollars spent on unemployment.”
I have heard that number as well and believe it to be greatly exaggerated. Let’s remember that automakers are lobbying the government for money here. I wouldn’t take anything at face value, but lets assume we do.
2 million jobs is a lot of jobs, but those jobs are at risk with or without a government bailout. A bailout doesn’t fix the root of the problem, it simply prolongs the life of these companies for a short period of time. GM and Ford collectively burned $14.6 billion in cash in the past quarter. The automakers are asking for a $50 billion bailout, that only buys them an extra 13 months. What then? Another bailout? Just like the AIG 2nd bailout? If these companies are to survive they need to face the facts and undergo radical change. It’s time to file Chapter 11 and get their cost structures under control.
@Chris Lockwood:
Unions have no place in a global economy, they make it nearly impossible for U.S. companies to compete with their international counterparts.
I agree that Foreign manufacturers locate outside of Detroit for that very reason.
The problem I have here is this: the reason the automakers are failing is because the people do not have the money to actually purchase the vehicles. The banks are going under, being taken over, etc all the time, and are ending up not lending the money. It’s a vicious circle and it’s probably why they are asking for the government to bail them out.
Ted, you got the point.. absolutelly right… There should be no free ride.. good read.. thanks