I have recently been getting into the bailout drama with the big three auto makers and boy has there been some drama. From congress asking each one of them if they flew in a corporate jet to request the billions in bailout funds, to the CEO of GM saying that it isn't his fault the economy is in the tank, to the insane statistics surrounding the potential demise of the American auto industry.
I just have to say that this entire situation is ridiculous. Really, how did we get here? The bailout was supposed to be for financial institutions - an injection of capital in the arm of the system that supplies money to the entire economy. The idea was that if these guys could be saved, then they would save every one else. At least everyone else worth saving, i.e. they would provide capital in the form of loans to businesses that were worth the risk. But somehow, we are now considering $25 Billion + to keep the automakers alive.
Who is next? Circuit City? Starbucks? Joes Smoke Shop? Really, where does it end? Last time I checked, bankruptcy and failure were part of the free market. If there is no chance of failure, than what is there to motivate businesses to earn a profit and be productive. Specifically, why do the automakers think that they are exempt from the rules?
The reality is that the automakers have massively debilitating contracts and extremely inefficient manufacturing facilities that vary drastically from one location to the next. So do we continue to keep building the same mouse trap? Do we really think it will work? Or do we let them all die?
Here's what I say... this country isn't big enough for the three of them. Let one die and let the other two declare bankruptcy. After they have declared bankruptcy, and have the ability to re-negotiate all of their debt and contracts, then the government could step in. It is here that we could provide a conditional loan with debt covenants that include heavy mandates to manufacture alternative energy vehicles, and require the CEOs to step down. Obviously these guys have not given us any evidence that they understand how to run a profitable business. This solution would shrink the supply and force the American car industry into the only business model they have a chance at succeeding in - Innovation and highly skilled manufacturing.
I know, it's not entirely a free market solution, but I'm afraid that the industry is just too squeaky for us all to ignore. They have the ears of congress, and in some cases they are large contributors that are owed a favor or two. Translation: I don't think perpetuating a "let them die strategy" will work. So the above is the best version of a compromise I can come up with.
Oh... I think we should force the CEOs to get a new business education too. Did you know that the CEO of Ford was proud of the fact that his company has enough cash to make it until February. Is he serious? Congrats Alan Mulally, your company won't die for 4 more months. Gosh, that must be why he made 22 mil from the company last year.
What a crock!
