Tuesday, December 16, 2008

Auto Bailout – Good Idea?

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Tis’ the season.  If you’re a bank, insurance firm, and now car manufacturer, it appears that Uncle Sam has a present for you.  The best part - it doesn’t matter if your naughty or nice – or competent.

I have to admit, I’m not that familiar with the banking industry or AIG.  I’m not crazy that we’ve set aside $700,000,000,000 (it hurts more when you write out the zeros) for the banks that made high risk loans.  However, the government got us into this mess by forcing Fannie and Freddy into the high risk loan business.

The car manufacturer problem is completely different.  The auto industry is not in trouble.  Ford, GM, and Chrysler are in trouble.  Toyota, Honda, and quite a few other foreign manufacturers are doing just fine.  The old big three are failing because that’s what happens in a free market economy; poorly run companies fail.

My job is heavily dependent on the auto industry.  If these auto makers fail, many of our customers will suffer and many may go out of business.  This means my company will have to take drastic measures to weather the financial storm.  People I know and work with may lose their jobs.  Who knows, if it is bad enough, maybe I’ll lose mine.

All that said, I can’t agree that as a nation, we should reward bad behavior by giving away tax payer money to companies that have proven they do not know how to be successful.  How long will it take these three to burn through $15,000,000,000?

Unless these companies go through serious restructuring, they’ll still fail, even with a bail out.  However, I don’t know if $15,000,000,000 is enough to even do the restructuring that is needed for them to compete.

Ford, GM, and Chrysler have been whipped in the market place.  Why do we think they’ll do enough to survive now, in a recession, with nothing but bad press?  If you need to buy a car this year, will you buy one from a manufacturer that has a good chance at being out of business this time next year?

Personally, my job security is much better if the big three survive.  Unfortunately, I think they’ve already died.  This bailout will only prolong the inevitable.

I hope I’m wrong.

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