Monday, November 17, 2008

To Bail or Not to Bail

It's old school day in Washington.  Everything that is old is new.

So, the Big 3 automakers are asking for some of the bail out dollars to "develop alternatives to conventional fossil fuel powered vehicles" to the tune of $50 billion dollars.  They say they need the money in order to be competitive.  There's lots of noise on both sides of this issue.  At root is the idea that these companies are somehow to "big to fail" and so important to our economy that we have to help them.

Well, I have problems with giving Detroit money.  We've already done this once with Chrysler. Despite 1.2 billion in 1979, they didn't do so well. Now they want more.  If the President of GM won't resign and the UAW blames the economy for the auto industry woes instead of their own inflated pensions, I don't see why we as Americans should leverage their bad business practices.  Neither one wants to make any concessions.  Neither one wants to admit they may have had a hand in running the American auto industry to ground.
What ever happened to the idea of supply and demand?  If a business can't compete, it goes under.  Make poor investment decisions? Tough cookies.   It's as simple as that.  Just because they're large and employ lots of people is no reason for the government to step in and throw money at them.  We let the airline industry file bankruptcy, why not the auto makers?  At least under bankruptcy law there will be regulations and methods of restructuring that can conceivably purge the idiots and get them back on sound footing.

I simply don't get why it's so important that these guys not fail.  Unfortunately, I think the bail out is inevitable.  The consensus in Washington seems to be that we have to do this but we're going to "add strings".  Sure we are.  Worked really well the last time, didn't it?


skyewriter said...

Hi, truebluetexan:
I agree with you whole-heartedly. I actually blogged about this very topic a few days ago (post titled "Decline and Fall (?) of the American Auto Empire").

Ludicrous union contracts and lobbying groups are part of the problem with the big 3. If we bail them out, we encourage other companies to follow suit, shun responsibility, reward incompetence, and then ask for a government handout.


Chris said...

I agree...the bad business practices, dating way back, a lot of greed and denial, and now we get to eat it....but it is going to happen! If we hadn't had this bad economic time, bankruptcy would have worked, but now we have no choice...they lucked out in holding out.