Including Everything Blog

Posts Tagged ‘Chrysler LLC’

Right now, top lawmakers are predicting that Washington would approve a bailout for U.S. automakers.  The idea was that the automakers (Ford Motor Co, General Motors Corp and Chrysler LLC) would submit survival plans that depicted their strategy for coming out of this financial slump with sales.

Both General Motors Corp and Chrysler LLC said that unless they received an immediate infusion of cash they would fail soon.  It is being said that Washington will have little choice but to offer this help to the U.S. automakers, as they account for 1/10 of American jobs.  Bankruptcy is not an option and an intervention is likely to happen either legislatively or from the administration.

My question to the public is simple.  If the bailout money had not shown its face, what would these automaker executives have done, then?  Just died off?  Hundreds of thousands of jobs lost to the United States?  Where does this responsibility fall onto the U.S. government to “bail out” companies that fail to sell?  Honda, Toyota and Kia seem alive and somewhat well…they’re even good for the economy too.

Should my own business concepts fail, would I be entitled to a reimbursement check from the feds as well?  What makes these companies (other than the fact that they’ve been around for decades) worthy of bailout when the American way is commerce and healthy competition?  By doing this, the U.S. government is enabling immunity from the economy to these larger automakers, yet stifling the ability for younger/smarter companies to move up the ladder in terms of marketshare.

While I understand the impact not helping the automakers would have on jobs, I don’t feel the top executives at the automakers are responsibly planning for the money’s use.  The Big Three automakers asked for a combined $34 billion in loans and credit lines on a day when they reported that in November they suffered a further dramatic slump in sales.  General Motors asked for $18 billion in loans and credit lines from the federal government, saying it urgently needs $4 billion of the money by the end of December to pay its bills.

Chrysler LLC, the smallest and most financially fragile of the Detroit automakers, requested $7 billion by the end of this month, saying that without the aid its cash could fall below the minimum level needed to operate in the first quarter of next year.

To pay its bills.  For one month.  Seriously?  I cannot believe we’re entertaining spending that much money (money we don’t actually have, remember…it’s borrowed) on jobs for americans that would last a period of 30 days.  We’re better off not granting that money to the automakers, and instead using it for reform within our economy to replace the jobs lost from the automakers.  Not only would it strengthen the economy, but it would help replace jobs lost.

The “bailout” money was intended to be a cushion for the financial industry, which are the lifeblood of our economy.  They need the help to stay afloat so that the financial infrastructure does not collapse.  It wasn’t until they announced the bailout options for AIG that I first heard about the automakers asking for hand outs.

One idea a friend of mine had was to allow the American public to “buy out” their mortgages at ten cents on the dollar (or whatever the appropriate fraction is), which would not only help to stabilize the finaicial institutions, but at the same time provide a better safety net for the American homeowners who are losing their pensions, 401K, IRA, etc.  This would give them a bargaining chip for finance management going forward.

Another person I’ve talked to recently stated that the U.S. government would be better off giving each american $100k, as opposed to giving the money to automakers as a band-aid that would only help in the short term.  Once the money is give, then the automakers crumble anyways…the money’s gone and cannot be recovered.  All for a temporary solution.

So what’s going to actually help our economy?  Continuously bailing out companies that do poor business, fly expensive jets with golden parachutes and bonuses galore?  I think not.

Additional insight:

Putting the Brakes on the Automaker Bailout
Deal Journal – WSJ.com : Automaker Bailout? Sure. Bank Bailout
Debating the American automakers bailout | Tampa | News | Word