Ford’s losing money like John McCain lost electoral votes. GM burns cash like it’s crack going bad. Chrysler has some cash, but they can’t sell any cars because they don’t make any good ones. These companies have been money pits for the passed decade. So what is the solution? Run to Congress for a bailout of course!
And with the Democrats in control of everything, thats exactly what they did. In fact the Big 2.5 went to meet with the #2 and #3 Dems last week. With #1 Obama having already expressed interest in bailing out the industry, Pelosi and Senate Majority Leader Harry Reid were happy to sit down with the Big 2.5.
The auto industry is asking for $25 billion to bail out their industry. Sounds reasonable compared to the $700 billion + we’re giving the finance people. Also Congress’s recent law requiring an increase in fuel efficiency is putting the industry in a pinch to develop technologies and new vehicles to meet the regulations. ”You make me more efficient, give me the money to do it” they cry. Compared to the banks this all sounds fine, plus it would save up to 2.5 million jobs.
But there is a fundamental difference. Actually, there’s a lot of differences.
First of all is the importance of the industry to the health of our economy. GM, Ford, and Chrysler make a ton of cars, especially when you include all the commercial trucks they build. Their failure could spell disaster for new auto sales. Well truck sales have already plummeted and they are outsold by the Hondas and Toyotas in the smaller cars division. There’s no question these large companies are important, but the industry survives without them. Let our banks fail and NO ONE can conduct business, the economy freezes and we have a Great Depression.
Then we have the fact that the rest of the industry is doing OK. Just the Americans are suffering. Toyota, Honda, Subaru, Volkswagen, BMW and others are all planning expansions. Of course this environment is hurting them but they continue to ramp up production of smaller vehicles and remain on the cutting edge of fuel efficiency, all while remaining profitable and not being bailed out by the federal government. The banking industry, with a few exceptions, is on dialysis.
Moving on to the job situation, the Big 2.5 often ignore the heavy union burden they are under. They can’t make good cars because they have to shell out too much in wages, pensions, and healthcare. In Alabama a non-unionized worker at Hyundai makes $20 an hour and carries full benefits. A decent living considering his education and professional background. A unionized guy up in Detroit is pulling in $45 an hour for the same job because of the fat UAW threatening strikes every 3rd Wednesday of the month. They are so powerful with the big 2.5 that the UAW president came along to the meeting with Pelosi & Co! That fat union has held back the Big 2.5 from being competitive in this industry, thusly digging their own grave and I will not be a part of that bailout. The banks on the other hand had lots of help failing the economy, from us. We took out those mortgages and bought those big houses we couldn’t afford.
Don’t forget about NAFTA, that thing that sent manufacturing jobs to Mexico and Canada. I supported NAFTA, but so did GM, Chrysler, and Ford. Most of their vehicles are made in these other countries and then imported, and they still can’t make a profit. So connect the dots, they want you to bail them out after they supported a treaty that let them build cars elsewhere, yet they claim the loss of jobs because of their failure now would be detrimental. I don’t have hard numbers, but I’m sure more jobs have been lost through NAFTA than would be if they failed now. Our banks have outsourced very few jobs, and represent the future of our economy, service over production.
My point is the bailout of the American auto companies is a huge mistake. It is a dying industry that has held on to the glory days of by-gone years for the past 4 decades. I’m sorry, but it’s time for the 2.5 of you to go. Detroit needs to move on from this industry. Yes people will lose jobs, but on the whole they’ll get retrained and be put to use in employment that is far better for our country than stamping hubcaps for the Dodge Avenger.
How many people do you know actually buy new American cars? Now how many people do you know that buy new foreign cars?
How many people do you know bank with American banks? Now how many people do you know that bank with foreign banks?
Roll over Auto execs, you’re dead. Don’t make me bail you out.
Read Ford Sucks
Read Your Taxes Might Bail Out Cars You Don’t Buy
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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