Saturday, November 22, 2008

Automotive Bailout?! Hell No!

I have responded to this issue on other blogs (Larry's and Fat Jack's), but I figured I had enough to say that it could fit on my very own blog post.

Yes, the auto industry has been bailed out before. No we should not bail them out again.

They are big boys and girls. They can figure out on their own that the UAW is destroying the company.

If the companies are not efficient enough to be competitive in the American Automotive Marketplace, then they don't deserve to continue to make cars and trucks. Why would you want the Government to steal 25 billion dollars of our money and give it to the companies who can't make superior automobiles, nor at cheaper prices, and stay afloat? Those factories will be bought out by someone else wanting to make cars, whether it be new startup companies, or the existing successful companies, and people will get re-hired to work in them. Unless Michigan or the Federal Government step in and protect the Unions and say that noone can hire auto workers unless they are UAW and then the auto industry will simply leave Michigan altogether.

The laws in Michigan are already extremely burdensome for business. Manufacturing has been fleeing that state for many years, and the only way to encourage it to come back is to repeal laws and make it competitive again. This is the problem with Marxism, admitted by their own people. Marxism (control of all industry by the state) cannot work unless it comes into power globally and basically simultaneously. Any place that tries to control its people too heavilly will squish out all the entrepreneurs and make them flee to lands of greater freedom.

To Dr. Cline about the price floor on gasoline. What will a gas station sell their gas for if it cannot be less that 3.50? Why voluntarily give taxes to the government if I can sell the gas for 3.50 and keep all the profit? Oh, then we will need the federal government to come in and determine what the REAL price of gas is, so that it can collect its taxes. So we'll have a federal agency able to turn a spigot up or down to destroy any company that it desires. How is that a good thing? And please don't claim that there are people that can handle that power without corruption. Someone will appoint an Exxon* loyalist to that position and the other companies will somehow buckle and go bankrupt. (* insert any energy company's name)

So, no. Don't give a dime to the people that can't run a car company. If they don't have handouts, they'll figure out how to renegotiate contracts or sell off parts of the company. No government involvement!

It is the collusion between government and corporations which is the greatest danger to a free people.

Update: I figured it would be worthwhile to answer Larry's questions directly:

1) Will this bailout fix the Big Three or will they just continue to use to the money to keep the status quo? I believe they need to bring in people with innovating ideas on how to make better cars and alternative fuel sources. If they continue to do business as usual, I think they will go out of business within 10 years even with the bailout.

No, the core issues will not be addressed by propping up their current failures. The way to bring in fresh ideas is to allow them to struggle and get to the brink of failure. Executives will be fired, the companies might be split up and sold off, etc.

2) Will the Big Three pay back this money? If the taxpayers are expected to save them, then they should pay back every cent with interest.

No, a failing company cannot take an investment and generate a return on it.

3) Why are companies like Nissan, Toyota, and Honda successful in making automobiles in the U.S. while the Big Three need a bailout? What should the Big Three learn from these companies?

The other Automakers don't have the UAW dictating wages. The UAW pushed too hard and milked this cow to death. If the UAW releases its grip on wages and allows retired people (who retired at only 50) to have to come back and work for their benefits, and allows new hires to be brought in at competitive wages, then the company may survive. It's all about cutting costs.

Update 2:

Moreover I'm not pro-executive here either. Many costs can be cut at the higher levels of the company I'm sure. The company as a whole must be cost effective and efficient. If it is not it will wither and die. It will be defeated by a company that is willing to be more efficient.

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