Thursday, November 20, 2008

U.S. Automotive Bailout

Enough already!

The automotive industry should not expect a bailout package.

The American taxpayer is already on the hook for over $700 billion dollars in the current financial market meltdown. How much more can a man bear? The automotive industry should have foreseen their problems with soaring gasoline prices throughout the country. Demand for the vehicles that they were making started to dwindle yet they did nothing to improve their business model except bury their heads in the sand.

We have to step up our pressure on Congress to let them know that the US treasury cannot become the lender of last resort for failed business models. Congress approved $15 billion in bailout to the airline industry post September 11. This was money guaranteed to an industry where only a handful of players, Southwest and Continental to name two, had cash on hand to survive the downturn and passenger fear of flying prior to the terrorist acts. All the while not one dime was spent bailing out all of the dot com business failures in 2000 and 2001. I would have loved to see Web Van survive.

Should the auto industry be allowed to enter bankruptcy? Probably would be the best answer. For at least as an entity in bankruptcy they can continue to operate as a debtor in possession and restructure debt and contracts to allow for a stronger company post bankruptcy. Yeah, the shareholders of these organizations would lose out but the investors knew that going in. Buying stocks is a risky business and not all investments are good investments.

Who else would lose? The unions most certainly would stand to lose. Contracts could become void or re-negotiated to make for a more favorable business climate. Waste would be eliminated throughout but innovation would be increased. There would be the human toll of possible loss jobs.

Should retailers such as Linens n Things, Circuit City, Mervyns, and Tweeter ask for a bailout because of their inability to survive in a competitive yet challenging economy? Sure why not, these companies are no less important as the U.S. automakers. Should we bail this industry out we send another signal to all other industries that if you cannot succeed then the taxpayer has your back. This has to stop and has to stop now. .

Instead of interfering with the market forces, Congress must find a way for the automotive industry to fast track themselves through the bankruptcy and reorganization procedures.

What about Honda, BMW and Toyota? They too operate in the US. Yet they are not lining up to get their check. Hmmmmm, I wonder why?

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