12.12.2008

To Bail or Bailout?

I think an awful lot of attention has been put on this proposed bailout of the Big 3 US automakers. There are several realities that should be kept in mind. The money the Big 3 are asking for is almost nothing compared to the already approved bailout of the financial markets, $34 billion compared to $700 billion is a drop in the bucket really. And there was far, far less complaining about bailing out Wall Street.

Which, in the light of Bernard L. Madoff's admission of a $50 billion dollar fraud, might be needing more than a little more attention. It might just need some clarity of what the bailout is doing, who its saving and where the hell our money is going and why. Madoff's fraud alone could have covered the full request from the Big 3 with enough left over to build a brand new auto industry that doesn't suck balls.

Which brings me back to the Big 3. Chrysler has been bailed out before, they didn't learn anything or change their practices and are so far in debt and, literally, have no chance of ever balancing their books. Giving them more money to keep going is like giving a bottle of alcohol to the dying homeless alcoholic, it might soften the inevitable but the body is withering and dying regardless. I say Chrysler is allowed to die the death it has earned for itself. GM is in a similar place, maybe not quite so dire but still dire enough that they are absolutely pleading for an immediate cash infusion to keep the factories running and producing vehicles that can't compete with the Japanese automakers. Let GM die too.

Ford is the only one of the three that isn't utterly desperate for an infusion. They can use the cushion in case the US economy continues its freefall but they should be able to survive on their own.

The problem is, in my admittedly neophytitic understanding, that there is just too much overhead on the Big 3 combined with, to be honest, sub-standard products. Chryslers suck, I'd never even consider buying one. GM cars are like bad copies of other company's cars. Ford makes a decent car and I have to admit that I love our Escape. It is the overhead that is annihilating these companies. I've been looking at numbers and, from what I've read, a worker at GM costs $69 an hour to employ and gets paid about $30 an hour. The same worker at a Toyota plant, in the US, costs $48 an hour to employ and gets paid the same about $30 an hour.

A company cannot compete with an inferior product and a nearly 50% higher per hour cost for workers. It is just not a viable business model and throwing more money at the problem is just a waste of money that could be better spent in training and assisting the workers at those dying companies.

Honestly, to hell with the piss-poor and arrogant management, engineers and designers. They caused this mess with their stupidity and, dammit, I don't see why they should be bailed out. If they'd been actually trying to make a better car then they wouldn't be in this mess. Calling the bailout a loan is a lie, the money will be gone forever, wasted on companies that are collapsing under their own weight, like a beached whale that can no longer survive even if it is dragged back into the ocean.

I must say, it feels odd to be in agreement with the Republicans on this issue.
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