Monday, November 17, 2008

Should We Bail Out the Big Three Autos?

The auto bailout probably should include public hangings of the CEO's and board chairs of all the Big Three.
Imagine the TV viewing and ad revenues; part of the latter could be used to bail out the firms.

No one is discussing that:
A. a Big Three bailout won't get buyers to buy cars in a depression with no loans available;U.S. sales will drop to 10+ million cars or fewer from 17 million. Why assume that we need 17 million new cars a year? What does that mean for global warming?
B. It takes three years for the Big Three firms to produce model changes, better mileage, electric cars running on solar energy, etc. Ironically Ford has a 40 mpg car in the Fiesta due out in 2010, but they are still headed for bankruptcy.
C. the Big Three are transnational corporations owned around the world, with stock selling and held around the world. Buicks are made in China. Must we bail out a Chinese-based luxury auto manufacturer? Why do U.S. taxpayers still consider these as American car companies? Ford owns part of Mazda. Do we bail out Mazda workers in Canada and Mexico?
D. in a global economy, the bail out of foreign GM/Ford/Daimler workers in Germany, etc., creates a whole new model for a U.S. global socialism -- government funds borrowed from China, invested partly in domestic jobs, partly in overseas jobs. Clearly the Chinese sovereign wealth fund is not investing in GM, but we would with Chinese money on bonds we would issue.
E. the business models of these auto companies are manifest failures and not amenable to "restructuring".
F. we ought instead to invest in auto companies that are not asking for bailouts --Toyota, Honda, Hyundai, all with factories and some suppliers in this country. Increase their sales and jobs.
H. government has no idea how to run or regulate auto firms, much less to determine what equity at what risk taxpayers will receive for their investment.
I. No one is talking about the huge federal debt service an auto bailout will require, and how much more in bailout funds will be sought as the firms inevitably go bankrupt and the first $25 billion vanishes into the auto sinkhole.
J. Bankruptcy allows companies to deal with their creditors under court conditions transparent to all.
K. Will the Big Three Autos continue to spend money on professional car racing, i.e., put taxpayers in the role of subsidizing a gigantic waste of gasoline, pit crews, and multiple car crashes described as a sport?
L. Car companies have gone out business since cars began selling. Where are Studebaker, Packard? As car companies move further into oligopoly, quailty descends, prices rise, competitive advantage ebbs, and taxpayers become at risk for a too-big-to-fail bailout socializing the costs of private enterprise mistakes. Why not have the FTC stop oligopolies long before we reach that stage?
M. Re: private investments, the U.S. government needs to look for the best long term return financially and socially. Allowing bankruptcy in the Big Three would free workers to produce something else better designed and more useful -- windmills, solar panels, bicycles, buses running on hydrogen, an improved national electrical grid -- with a few remaining at work on the GM Volt , which promises 100 mpg in two years.

What is your solution to the great American auto crisis?

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