The Deuce Blog

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Stop the Bailouts!

No one can argue that many segments of our economy are suffering. We as a nation need to figure out a way to put the country back on its collective feet. What we don’t need is another industry bailout. We are throwing our financial future away as a nation by continually bailing out bad companies that did a poor job of managing itself. We now have a $700 billion dollar bailout package in place that we have financed through loans from foreign governments. The Treasury Department this week said that now they are not going to follow through with the original plan they had in place. How are we supposed to trust our government with more of our money?

 

We cannot afford to bailout another industry, especially the auto industry. Their failure is not a result of the poor economy. The American auto industry has been failing for years and the bailout will only prolong the inevitable, not help the industry turn around. The auto industry’s biggest problem is that because of the costs of doing business they simply cannot afford to stay in business. The legacy cost along with the ridiculously high labor cost and associated costs in dealing labor unions put a big strain on the American Auto Industry’s ability to compete against foreign automakers.

 

Another problem is that Michigan is one of the worst states to do business in. In fact it is ranked 49th in the United States as business friendly. That is a problem that must be addressed at the state level. Michigan must look at ways to help all business including the auto industry within the state. Things such as lowering taxes for business, doing away with regulations that are not business friendly, and even lowering income taxes so that Michigan citizens can consume more would help.

 

Lastly lets not forget the CEO’s of the Big Three. They have failed in creating a business model that works. They have not put their company in a position to succeed in any market. They must do a better job in controlling cost and restoring confidence in their products for consumers. These CEO’s must be willing to take drastic steps including moving out of Detroit if necessary. The leadership must step-up to the plate or no matter how much money the government gives them it will not be enough for them to succeed.

 

Enough is enough, now even cities are trying to get a cut of the pie. We simply cannot afford as a nation to bailout every industry that is in trouble. While I was against bailing out the banks and financial sector, I feel that with the way the government forced banks to make bad loans, it was something that needed to be done. The situation with the auto industry is different. The industry while it is suffering more because of the bad economy, they brought on the situation themselves. Both management and the unions need to take a look in mirror and put their own egos and greed aside and do what is best.

 

We must demand that the industry work this out from the inside. The state of Michigan must also get involved to improve the business environment as a whole. Yes that could mean consolidation and or the collapse of one or more of the Big Three automakers. Just like the airline industry it must recognize that times have changed and that it cannot be business as usual any longer. Until such time that the auto industry and the state of Michigan makes real changes in its business model, I am vehemently opposed to any bail for the industry. I ask that everyone write, call, and e-mail your Congressman, and Senator, and demand that no more money be wasted on bailing out failing companies.

 

 

November 16, 2008 - Posted by thedeuceblog | Money, Politics | , , , , , , , , , , , , , , , , | 8 Comments

8 Comments »

  1. I think that if the auto makers are given bailout money, they need to restructure the way they do business internally and externally:

    Internally: Get rid of the workers unions. Union workers get paid 2-3x the amount of a regular worker for their specific positions than other auto makers such as Honda and Toyota. It makes these companies increase the amount they charge for a vehicle (ie. a small Ford or Chevy vehicle costing $30,000 brand new). They also need better management. They are making vehicles based on 100+ year old technology (internal combustion), too many big vehicles (heavy duty trucks and SUVs) and not making enough energy efficient vehicles (hybrids = fuel cell, synergy, electric). The management of these companies has a lot to do with this. The management is saying that the demand for these types of vehicles in the US is not significantly high enough. Why is that? Union workers’ salaries and too many overhead costs. There’s not a normal person that can afford a $50,000+ standard sized vehicle, so they resort to producing internal combustion.

    Externally: Prices on he vehicles. Simply put, as mentioned above. A normal middle to lower class citizen cannot afford to purchase any of their vehicles brand new. They resort into buying foreign competition and used vehicles.

    In order for these bailouts to work, these companies need to restructure themselves completely. Will they do that? We can only hope so!

    Comment by Rob Dicken | November 17, 2008

  2. Another note…

    Many European countries have been running on fuel efficient vehicles for decades because of fuel costs. Ford and Chevy see a higher demand for these types of vehicles in these countries more than they do the US, which makes them more affordable in these specific countries.

    Ford, Chevrolet, and Chrysler do not have factories built within the US or Mexico to produce any of the hybrid/fuel efficient vehicles, so they build them overseas and import them here (ie. the overhead costs I mentioned above).

    It would only make sense, that this bailout money be given to these manufacturers to create factories within the US or Mexico to produce these vehicles.

    If it is not going to be done, then NO THEY DO NOT NEED TO BE BAILED OUT!

    Darryl is right. If the money is not mandated, then this will only prolong the companies’ demise.

    Comment by Rob Dicken | November 17, 2008

  3. I say let these union heavy companies figure out how to do business and make a profit or go out of business. Toyota is hiring people right now. They’ve figured it out. Volkswagen is opening a plant in Chattanooga and hiring people. Subaru has figured it out. These auto companies don’t have the unions the big 3 US auto makers do.

    Comment by krs | November 17, 2008

  4. Some economists worry that if we let an automaker go down, it could potentially spin us from a recession into a full-blown depression. The concern is that the loss of a million jobs in auto assembly/parts area would then filter down to millions of more job losses in related industries, mostly in the midwest. The answer of a resounding “no” to a bailout would be easy if not for our already-staggering economy and ever-growing unemployment rate. We’re going to pay the piper one way or the other, but just how high will the payment have to be?

    Comment by Scott | November 17, 2008

  5. Scott, I highly doubt America would go into a full-blown depression if an automaker goes down.

    I agree with Darryl that we need to stop bailing out these poorly managed industries. Free market cuts businesses out, which can give rise to better companies that can survive in the changing market (and possibly produce more fuel efficient and innovative vehicles).

    I just bought a car, and I feel like I’m buying billions more as a taxpayer if we bail out the automakers.

    Comment by laurascheper | November 17, 2008

  6. I have my doubts about a full-blown depression, too. However, unless your or I happen to be economists who’ve studied and understand this, our opinions don’t count for anything. Our doubt won’t be much consolation if it were to happen.

    I’m all for businesses to succeed on their own merit and good practices, of which the auto industry has shown very little, but their supply equalled our demand. It’s easy to point the finger of blame now, but what were we doing 5 or 10 years ago? Buying SUVs. They made ‘em, we bought ‘em. Everybody was riding high during the good times. Now that the time has come to pay for the greed, we, many of us still driving our SUVs, say shame on the auto makers for not being more forward-thinking. I know that the industry’s willingness to put all it’s eggs in one basket is only one of a multitude of problems it faces, but it’s part of the equation.

    Comment by Scott | November 17, 2008

  7. I think the biggest problem is that “foreign” auto makers in the US have found a busniess model that works and it doesn’t include unions. Americans will buy the best product at the best price and for a number of years the Big Three have had neither.

    Plus how can we consider companies such as Toyota and Honda foreign when they have plants in the US. It is now different than for or GM having plants in Mexico or Canada.

    Comment by thedeuceblog | November 18, 2008

  8. Scott, the problem is…they are still developing the same fuel hogs at the same pace as they did 5-10 years ago. As an automaker, you are supposed to have economists and management set in place to predict a future for the auto business based on trends and consumer demand. ALL of the other auto makers except for Ford, Chevy, and Chrysler are making fuel-efficient vehicles and have been for years. The big 3 have refused to adapt to demand for more fuel-efficient vehicles.

    My step-father worked 30+ years for Ford. He repaired the machines that aided in building the vehicles. He has even mentioned that they are on the same platform they were 30 years ago. Hell, they’ve been developing 25-30 mpg vehicles for over 30 years and haven’t proceeded any further! Don’t you see anything wrong with that?

    Saying that WE should pay for the “greed” from 10 years ago is NOT the way to look at it. 10 years ago did you or any economist predict a 400% increase in fuel prices and a recession? Were we warned of this by the automakers of America? No…and when the time came for this, the big 3 were not prepared to make an adjustment to those fuel price increases.

    The average American cannot afford the prices of the Big 3’s vehicles because of workers’ unions.

    Their whole model of the way they do business is wrong.

    I find it contradictory that you talk about Wall Street and big corporation greed, but when it comes to a big corporation possibly closing its doors because of bad business practices, then you’re quick to defend them and want to spend tax payers’ money to prolong their demise.

    Comment by Rob Dicken | November 18, 2008


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