Thoughts on the proposed U.S. Auto bail out

carsI keep hearing things about a bail out for the American auto industry.  Sounds like more fun with idiocy. How about this maybe the American auto industry wouldn’t need a bail out if they made cars people actually wanted to buy?  I don’t drive an American car I drive a Japanese car because the Japanese as well as the South Koreans know how to make a car that actually works properly and doesn’t fall apart if looked at funny.

Here’s what I think if the U.S. auto industry can’t make a car that is good for something other then keeping junk yards and scrap yards in business maybe they deserve to fail.  Lets face it GM and Ford haven’t been able to make a  more then a couple decent cars in years so why are we going to prop up these companies when they can’t even do their job.  If the kid at the cash register at a convenience store can’t do his job he gets fired.  If a car company can’t make a decent car why can’t we fire them?

Enough with the bail out crap you are rewarding bad behavior.  If these Auto companies wanted to stay in business they would have tried to make a product that they can sell.  That’s the points of business creating something people want to buy and making a profit off of it. They used to do it quite well.  We need more corporate welfare about as much as we need regular welfare.  If you work at one of these companies why don’t you get together with the management and try to figure out a way to be competitive in the marketplace?  If you are a shareholder you might want to do the same thing.

These companies wouldn’t be in trouble if they made cars people wanted to buy and since they apparently don’t want to do that they want the government to steal our money and give it to them.  I don’t want people to lose their jobs but I don’t want to have the government steal my money to prop up a company whose products I wouldn’t buy.

Rich Lowry of the National Review puts it this way:

“But this crisis is only the punctuation mark on decades of decline. Once a market-dominating behemoth, GM had 50 percent of the U.S. market in the 1960s. It is down to almost 20 percent now. U.S. consumers have long been voting against U.S. automakers. Now, they’ll be asked to put their tax dollars at risk to preserve the very companies from which they don’t want cars.

The bailout would be of the United Auto Workers as much as of the automakers. It’s the UAW that saddled the Big Three with unsustainable labor costs and obligations to retirees. Detroit has desperately been trying to get out from under this burden, but Ford still lost $1,467 per vehicle in 2007, while GM lost $729 and Chrysler lost $412. Where the UAW doesn’t reign, the industry thrives. Toyota and others profitably manufacture almost 4 million cars in nonunionized states in the South.

The case for the bailout is that the job losses from a GM going down — 100,000 directly, and many more indirectly — would be too painful to bear, and the government would be left holding the bag on GM’s pensions. This line of reasoning conceives of GM essentially as a job programs and welfare agency.”

Here is another good read from Michelle Malkin.

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7 Comments

  1. Isn’t it just infuriating?

    From my perspective, if it costs more to make your product than what people will pay for it, your business is unsustainable. Simple.

    I don’t want any more government money to prop up businesses.

    And for the companies that do receive bailouts — the top executives should get zero, zilch, no pay.

  2. I will give you that one. Although I did read a good article from Thomas Sowell where he was arguing it is sometimes cheaper to pay the CEO off to leave then keep him around.

    “If the CEO’s decisions are costing the company billions, it is a bargain to get him out the door immediately for millions, rather than having his departure delayed by either internal struggles or battles in the courts.”

    http://townhall.com/columnists/ThomasSowell/2008/10/01/penny-wise_politics?page=full&comments=true

    But yeah if the government has to give the company money that money should not go to the CEO.

  3. Out here in Australia we’ve already done what you folks are proposing. Just gave the local car companies $6 billion dollars. And they’re not even local companies, they’re owned by Ford and GM.

    It’s also a similar problem here, both are not really manufacturing cars that people here are willing to buy. However the cars that they do make are pretty good, they’re not falling apart or anything, but they’re just too big, guzzle too much petrol and are too much car for what people want, if you get my drift.

    What they should really do is provide funding with conditions and only for a limited time.

    Ah the unions, where ever you go, they are a problem, thanks again to the left.

  4. Well not all of the American cars are bad however I would take a Toyota or Hyundai over most American cars. I did notice the times I was in Australia in looked like half the cars were Fords or thats how it looked anyway since it’s probably something you would be more likely to notice.

    Well the companies can afford the labor and that is one problem and if they aren’t getting the sales even though they have these huge contracts with the Unions it’s going to fall apart. The question is should we be on the hook for bad decisions made by the companies and the labor unions? I think not.

    Good to know people down there read this though. I love Australia. People are usually pretty friendly and nothing beats a Tooheys Old Black Ale and a kangaroo steak. Although any time I can get my hands on some Victoria Bitter or Emu Bitter I’m happy. They might not be the best of Australia but you do miss them when you can’t find them and they put Budweiser to shame. It’s like Kirin or Sapporo in Japan while your there it’s just decent beer but when it’s not all over the place you kind of miss it and want it now and then. Although the last two you can get in the states if I found Tooheys I would freak.

  5. It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn’t have any real effect.

    This time it’s the car industry.

    While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable – so this time let’s target unemployment, create AMERICAN jobs and pump up the economy all at one time.

    Consider the following:

    Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that’s not all direct but due to suppliers. GM alone has over 1300 suppliers. (That’s a lot of jobs!)

    1 in 10 Americans makes all or part of their income due to the automobile industry.

    Money turns over 5 times in a year.
    Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
    (This isn’t magic, it’s simply how the economy works.)

    Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.

    Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
    Foreign competitors have worked off-shore collectively to meet various US gov’t. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.

    Make no mistake; it’s no surprise that once again government has been a major part of the problem.

    Here’s the solution.

    Instead of either shipping cases of cash off to car makers; or sending us all another check:

    Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that’s domestic. (Civic = 70% Ford Explorer=80%)

    Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.

    This would bail out the car industry without giving them a dime directly
    Further it would reduce the overall age of the nation’s cars which would in turn;
    increase overall fuel economy
    & decrease pollution.

    Strengthen the dollar!

    Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported …like gas!

    Jobs

    Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
    That would give the economy good swift kick right where it needs one!

    Pays for itself!

    Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
    What is the income tax on 65,000 anyway?
    (Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)

    Another Stimulus Package?

    I’m sure you’ll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV’s usually made in Malaysia or some such place.

  6. American citizens are facing desperate financial times. These times will require great leadership, sacrifice and tough doses of distasteful medicine to treat and nurture our economy back to health.

    No super power can remain secure and economically viable without a world class automobile and trucking business. We cannot purchase military hardware from current and potential adversaries. A bail out of the automobile and trucking industry is inevitable because of our current economic crisis; the question really becomes how do we accomplish this goal and not reward and perpetuate the short sighted past mistakes of the automotive executives?

    I propose that the U.S. congress offer a $4,000 tax refund for tax year 2008, to be used to purchase a certified American made high mileage 4 cylinder traditional small car or truck. American made cars and trucks in this program will be made available through guaranteed government supported loans. Vehicles selected for this tax refund will have guaranteed (real) 50,000 to 100,000 drive train warranties along with pre-paid maintenance service agreements. The tax refund checks will go directly to the dealer, the buyer will receive a low interest loan with no payment due for one year. American citizens who purchase these cars will be eligible for an additional $1,000 to $2000 dollar 2009 tax refund to be applied toward the car purchase depending on how well the economy is doing.

    This idea is predicated on congress and the automobile industry conducting basic moral and ethical business practices. For example don’t select lousy cars with obvious engineering flaws. If a vehicle has a problem, “fix the problem before certifying the vehicle for the program”. Develop and provide vehicle reliability and mileage documents for the buyers. Have the buyer read and sign an affidavit that he or she read the reliability before purchasing the vehicle! Do not allow superfluous accessories to be added on to the low interest loan purchase. Do not allow high mileage gas guzzling vehicles to participate in the program. Do not allow the program to be hustled by

    This program will save vital American jobs! This proposal will force the industry to market our current best environmentally friendly vehicles. These cars are the most environmentally friendly and cost effective cars and trucks we have available at the present time! It will make doubtful Americans that have been burned in the past realize that there are some good American made high mileage cars! And finally it will help sugar coat this awful bailout medicine the working American middle class is being forced to swallow!

    It’s time for all American to pull together and realize that our nation cannot be the flea market for the world’s economy. We cannot buy all our consumer and industrial goods from foreign nations and sustain a viable government, economy and growing educated middle class.

  7. No it’s time for the big 3 to come together and figure out how to make a car people will actually buy. They also need to tell the unions to shut up and stop giving them insane contracts.

    If the companies go bankrupt that just gives another company a chance to buy them out and maybe run the industry properly.


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