"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." --Thomas Jefferson

Sunday, November 16

Bailout of the Week


I read the newspaper again today. Seriously I need to stop. If it's not a story about angries protesting Proposition 8 or the Obama's new dog, it inevitably reverts back to a story about a laundry list of companies that are either on the verge of going out of business or are waiting to go out of business until they get some help from the government.

The "Big Three" automakers are on the verge of closing their doors. Ford, GM and Chrysler are the lifeblood of the Midwest economy and a major cog in the national economy. In 1979, Chrysler was struggling financially due to massive recalls on some of their more popular models. Their large gas guzzling cars in the 70's didn't help the situation any. Chrysler received government guarantees on loans in 1979 under Lee Ioacocca. Ioacocca, (who was former president of Ford Motor Company until 1978 and helped innovate the Ford Mustang-One of Ford's most successful and profitable lines) was fired by Ford. Ioacocca was snatched up by Chrysler and started making more fuel efficient and innovated new models that sold in record numbers. Ioacocca brought with him ideas for what is now called the mini-van and small, fuel efficient, compact, front wheel drive cars. They sold like hotcakes and the loans were paid back long before the government required.

The situation the "big three" find themselves in is hardly one of virgin origins. Like downturns of the past, no plan for the future, no innovative new models, no planning for global and economic changes. These big three automakers embody the epitome of reactionary economics. "Wait until something happens and the government will bail us out because they have in the past and we are too big to fail." Wait! I have a better idea!

Try American innovation. Henry Ford did. Try running a business like a household. In the black. Save some cash for a downturn or change in the economy when people might not be buying as many cars. Bet on the future. Imagine something unexpected. Like them or not, the Prius was an idea from Toyota that resonated with many people. Now GM makes hybrid models. Like the Tahoe. It used to get 15 mpg. Now it gets 20. Big flippin' horah! These are not new problems these companies face. The auto industry as a whole has forgotten the lessons of the past, ignored the warning signs and proceeded with reckless abandon with their business models that have proven to fail.

Can we blame all of the woes of the auto industry on automakers? No. They are, like many others, experiencing difficulty because of lack of credit and the current economy. One topic seldom brought up is the UAW (United Auto Workers) one of the country's largest unions. It has a stranglehold on the American car industry. I sat through a continuing education course on health insurance a while back and was stunned to hear that GM spent more on its employees' health care in 2007 than it did on steel. On steel! Unions have crippled the business with labor contracts so prohibitive and constricting, that the automakers are at an obvious competitive disadvantage with the rest of the world. I believe that Unions do have the workers' best interest at heart but tell me this...if GM goes out of business due to these labor conditions, what good are those benefits to a due-paying member of the union? UAW have publicly declared that they will make no more concessions to the auto industry. Why because you've made so many? Again I say bleh.

The same problem exists in the United States Postal Service. The Postal Workers' Union has done such a great job negotiating contracts throughout the years that 8 out of every 10 dollars are spent on USPS employee compensation and benefits. Tell me what business could survive that model? Perhaps that's why the USPS asked the government for a bailout this week. Double bleh.

If a car company's leadership approached congress with a massive program to innovate new products, change the way people bought cars, expanded new technologies that were actually beneficial and not just a political statement, how much more willing do you think the congress and the average taxpayer would be to lend these companies money? Otherwise, what good would taxpayer money do...delay the obviously inevitable? If you're interested in flushing money down the toilet, I'd suggest a do-it-yourself approach.

Oh by the way...if you're standing in line for a bailout, the line starts here and wraps around the block.

3 comments:

Carlee Hoopes said...

Whatever. That's all I have to say. You know they'll get the money. I mean, the government's already done it for some industries, so they'll have to keep doing it. And it's not going to fix the problem. It's the car dealerships' fault for not innovating! Seriously. This is why the bailout's lame. It doesn't punish anybody for their actions, so what's gonna make them be responsible and forward-thinking in the future?

Anyway, I'm thinking I want a nicer house and car. So, I'm go ahead and get them and then I'll just get in line. Might as well, right?

Erin said...

i don't comment here enough.

let them die. it's a bit harsh, but there, i said it.

and while we're talking about unions, let's talk about the biggest pain-in-the-a$$ union of them all: american airlines flight attendants. (somebody hold me back... )

ps, kirk your donuts were totally incredible... fox about pooped his pants he was so excited about the sugary goodness. thanks again! can i have the recipe??

Kirk said...

Erin, I would be happy to give you the secret family recipe for the donuts but will have to do it over a secure connection. The last thing we need in the neighborhood is competition on Halloween! But they do have a secret ingredient. Your comments are appreciated, at least I know of a few people that read my rants!