Wednesday, November 19, 2008

Where's my bailout?

The big discussion around the country and in the media right now is whether or not the Big 3 auto makers in Detroit, GM, Ford and Chrysler, should be given a bailout in the amount of $25 billion dollars, to help them continue their operations. It's been suggested that this bailout would only prolong the inevitable, that is bankruptcy. So the question is, why do it then? Why give them money, taxpayer money, only to let it fritter away like the share price of their stock over the past years? My thoughts are these; why bail out these companies at all? Let the free market economy decide who survives and who does not. After all, if you bail out these companies, then other companies and industries will come to Washington and demand their bailouts too. What about every taxpaying US citizen? It was suggested in numerous e-mails before the big $700 billion bank bailout, I mean, TARP (Troubled Assets Relief Program) happened, that if you just gave the money to the people, they would pay off their own troubled assets, meaning bad mortgages and other debts. But back to the auto industry. What makes them better or more important than any other industry? Take the airlines. Airlines have an important and storied history in the United States, just as the auto industry does. Did the government bail out these companies, Delta and Northwest? No. Did they go out of business? No. Both companies declared bankruptcy in 2005 and have recently merged together to form a stronger, more cost effective airline and ready to compete for continued business. Now, it is being suggested that because companies like GM and Ford are so big and employ so many workers, that the trickle down effect to the economy would be devastating. Suppliers and parts manufacturers would go out of business too. And so on and so on. Well, that's possible, but I think there will always be a market for auto parts for the existing GM, Ford, and Chrysler cars and trucks on the road today. Take Edsel for instance. Edsel was a division of Ford (named for Henry Ford's son, Edsel Ford) that closed shop on this date, November 19, 1959. Now that is a long time ago and you and I probably don't see that many Edsels on the road today, but did you know that there is a market for Edsel parts and supplies? There are numerous parts suppliers, in business, to provide replacement parts and services the many Edsel car owners and aficionados around the world today. So while some businesses many also fail as a result of a Ford or GM (or both) failure, most would not. Perhaps each could emerge from bankruptcy leaner and meaner, to better compete with the Toyota's and Honda's of the world. After all, one reason the Big 3 are in the trouble that they are is because their labor costs average $72 per hour compared to the $45 per hour paid by Toyota and Honda. Whats more is the UAW is not willing to concede anything as part of a bailout deal? Huh? I guess they would rather their union workers lose their jobs than give up some of their rich benefits. I say let these companies work out their own problems like any other business is forced to do. Whether it's through bankruptcy, merger, or some other means, they need to get to the root of the problem or history will repeat itself. Say, didn't the government bailout Chrysler before? Yes, 1979.

2 comments:

Sarah Kempf said...

Hi Scott,
I will definitely be visiting your blog regularly! I am going to try to keep up with my blog now that the Music Man is over.

Scott Wheeler said...

Thanks for stopping by Sarah!

Scott