Tuesday, November 18, 2008

The Auto Bailout..AKA There's A Sucker Born Every Minute, Part II

Tell me, members of Joshua's Army....would you loan 'invest' $25 in something that was only worth $7?

Well, would you?

Add the word 'billion' to the above values and that's exactly what the Democrats in Congress are proposing to do with your money.

The entire value of the combined stock of the Big Three Automakers totals around $7 billion, yet the bailout proposition for the industry would loan them over three times the stock value of their companies combined.

And I certainly don't want some motard commenting on how these companies have assets and inventory worth more than $7 billion, thank you. When you own the stock, you own and control these assets.

Don't misunderstand me. I don't favor simply letting these companies go under.The effect on the US economy as a whole, where a big part of the game is confidence would be disastrous,not to mention the cost of the unemployment and business failures not only to the Big Three but to their suppliers down the line.

And there are also national security issues in abrogating yet another part of our manufacturing base.

GM, Ford and Chrysler have the ability to make superb cars here in America. So do companies like Honda, BMW, Mitsubishi, Toyota, Mazda and a number of other companies who have the image of being 'foreign cars' but are in fact mostly manufactured in places like South Carolina, Illinois, Ohio and Tennessee.

The first group of 'American' manufacturers actually farm out large pieces of their manufacturing overseas and to maquilladora factories situated in Northern Mexico just over the US border and take advantage of NAFTA's provision to utilize the low cost labor there, yet they're supposedly going bust.

The 'foreign' companies, known in the industry as transplants have the majority of their manufacturing here, yet they remain relatively healthy even at a time when the economy is down and car sales are slipping badly.

So, what's the difference? Two things...management and the UAW.

The Big Three have been saddled by poor management for decades. I still recall the poor quality fuel inefficient vehicles they used to produce until fairly recently and the high, noncompetitive prices they charged. Things have changed now,but there's been significant damage to the Big Three's brand names.

The United Auto Workers are another part of the problem.I am not the kind of person who demonizes unions, but there's no question that the UAW has played its part in the decline of the Big Three, not just in pay and benefits but in the huge entitlements and pensions it won for its workers. While some of the transplants own unionized plants, the majority of their production is non-Union.

What the Democrats are trying to do is not designed to help the Big Three but to preserve the UAW on the backs of the taxpayers. Ultimately, that's merely postponing the inevitable. And that's just as stupid as allowing these companies to go bankrupt.

Instead of throwing another $25 billion down the rat hole, it would be far better for the US taxpayers to simply spend the $7 billion and control these companies outright, then reorganize them totally with brand new management, and some sharply revised union contracts as part of the deal. They could then be reprivatized by selling the stock back to private investors at a profit.

Both management and the UAW would have to take some serious bites out of this crap sandwich, rather than have the American taxpayer swallow the whole meal. And the companies would be preserved, as well as the jobs...if at a somewhat lower pay scale than people on both sides of labor and management are accustomed to earning.

While I normally don't favor government control of industries, the above solution makes a lot more sense than letting the Big Three go bankrupt or tossing them a huge windfall at the taxpayer's expense. Especially if it's designed as a temporary situation, with reprivatization built into it.

The Democrats in Congress, of course, wouldn't hear of this kind of solution. They could care less about Other People's Money,and their primary object is to preserve the union..er, the UAW, that is.


Anonymous said...

After the 700 - billion - dollar boondoggle for the financial institutions (which already has been re-directed!), I could see the flood - gates opening. 'Couldn't care less' was what you meant to say re the Democrats, which are simply waiting for the current care - taker government in the Oval Office to leave on 20 Jan. Your solution makes sense, & that's why Washington, DC & the '2' - party monopoly could never accept it. Chrysler already has been bailed out once ( 1979 - 1980) ! To add further insult, the car - makers already have been given a 25 - Billion - Dollar loan for fuel efficiency.

Freedom Fighter said...

Obama is just waiting for Bush to leave so that he can enact his radical version of the New Deal..consolidating his political power based on misery and dependence.