Thursday, November 13

Bailouts

So now the auto industry wants in on the bailout plan. If my husband wants to put his tax money toward a failing auto industry, I think he should at least get an auto out of the deal.

Just imagine the financial sacrifices our new President and Congress might require us to make if we are to fund the bailouts of all sorts of failing companies. It's already beyond ridiculous, even before the auto makers get their share.

Actually, let me oversimplify my take on the situation: I think these companies should be left to face the consequences of their mismanagement of resources and the reality of the current markets. In their places would rise up new, innovative business models and modern technologies. The failure of the auto industry as we know it might be the fastest track to alternative-fueled vehicles. I also believe Ron Paul is right about this:

We have to understand that an economic correction needs to take place and the only way out of the coming recession is to go through it. Efforts to avoid it can only prolong it.
I find it curious that he did not get the Republican nomination. But God knows the future of this country, and has put people in place who will take us in that direction. Lord, have mercy on us in our decline.

5 comments:

  1. All I can say is AMEN!

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  2. I second the amen. Who will be there to bail out our country when we finally have to face our stupid spending consequences? You are absolutely right. Let the companies fail. A free market can handle that. Our government is just giving in to fear.

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  3. General Motors asked for a LOAN much like the one given to Chrysler (and paid off early) in the 80s. That request was turned down so they decided to ask for a handout. They are also floating the idea of filing bankruptcy to their dealers. Chrysler probably isn't going to make it this time.

    Anyone else remember the phrase "As goes GM so goes the nation"?

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  4. Adding a couple of other things...

    Nothing is as simple as we like to think. Many factors go into a profit and loss margin.

    GM is selling cars in Europe that get 40 mpg. They aren't on sale here because someone in Detroit thought they wouldn't sell here since the buyers were buying large vehicles.

    They are "looking at" selling them here. Idiots.

    Of course the price they sell for here will be different as will the gas mileage due to changes in design to meet US safety and emission standards.

    GM retirement/pension is administered by the UAW as per the last contract. Both GM and the union membership thought this would be a better plan than the current one.

    GM has transferred $40 Billion (that is BILLION with a B) to the UAW in the past 15 months (since the contract was signed September 2007) mostly in cash but a small amount of stocks and real estate.

    The transfer of $40 Billion and the contract are part of the reason GM is in a money crunch right now. It should help retirees for the union to be in charge of our money. HOWEVER, if GM files for bankruptcy many think they will take a page of out the airlines' plan and ask to courts to void all union contracts. If that happens, GM hourly retirees who worked 30+ years for that pension, like TWA and Braniff retirees, millions will have no pension.

    When companies close it affects more than just that company. The current estimate of jobs affected if GM and Chrysler go under is around 700,000 - 800,000 and those estimates are not coming for the automakers but from people outside the industry.

    GM and Chrysler currently employee something like 100,000 people in the US so where do the other 600,000 - 700,000 people come from?

    They come from companies like Cooper Transport which transports autos from manufacturing plant to dealer, they come from those who worked at places that made, produced or shipped auto parts to auto manufacturing plants, they are dealers and dealership employees who no longer have a car to sale, they come from technology people who work for EDS who contracts out to GM, they come from the restaurant across the street from a plant who no longer has business from the plant's workers, they come from neighborhood businesses in the neighborhoods where autoworkers live, they come from home builders who don't have people buying their homes, they come from retailers who go out of business because they no longer have enough business...
    they come from your family and mine.

    Nothing is ever as simple as it sounds.

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  5. T in Mapleton11/15/2008 6:57 PM

    There is a difference between "simple" and "easy". Free market economics is a pretty simpleconcept. Government/business entanglements are complicated. I hate to step on toes here, but the unions and the employees that have worked for GM over the past decades demanded pay and benefits that would ultimately be unsustainable. That was easy enough to see on paper. But they demanded anyway. Now, when they all retired and stand to lose what they fought for... well, I don't know what to say.

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