While bailoutpaloza continues I have to put in my two cents on the proposed auto bailout. I truly believe that if we bail out the auot industry now it will be the end of the big three. You may ask why is that? how can that be the talking heads say that if we do not bail them out it will be the end and the entire country will colpase(sp).
To that I say bulls*, that is the same line the politicians used for the 700 billion dollar oh wait now it is a trillion dollar "rescue package". People they are trying to scare us into believing that markets and capitalism does not work, so they have to take over the economy.. to that I say ENOUGH!
why do I say that they must be left to fail? Right now the big three are a mess, and if we bail them out then there is no incentive for them to change,and then in two years they will be in a bigger mess and need another bailout.
This is a quote from Romney in the NEW YORK TImes," With it,(the bailout) the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."
For the first time in my life I agree with anything written in the NYT. Due to unrealistic contracts demanded by the UAW and the managements stupidity to agree to these demands, the big three spend an extra $2000 per car on labour than BMW,Toyota, Nissan and Honda. That means that GM has to put $2000 less feature's in there cars than Toyota, there is the difference in quality.
So what is the answer? I believe that they must be allowed to fail. Bankruptcy will force the management tobe reorginized and to restructure their labor agreements. With out this happening the big three will fail. Now the union's will say we can not take any paycuts or reduction in benifitts, if they stick to this then with in a decade there will be no one left to employ their members. If the unions do not realize that the golden goose is running out of gold then the UAW to will fail. The management needs to reduce their bonuses and instead use stock options as a mean to incentivize the restructure of the company. This is a big mess but this formula has been done before.
The airline industry has probably had the worst decade that any industry could have, first 9/11 then the massive increase in fuel prices. Many of the companys had to file for bankrupctcy and several failed, but it forced them to restructure there labour contracts and management incentive's. Many airline employee's had to take large pay cuts, with the idea that it is better to be getting paid less now than to not have a job. The airline industry is still not back 100% but it is well on it's way, and when it is whole again it will be a leaner and more efficient industry. The same thing must happen to the auto industy if you want to be able to buy a Ford or GM ten years from now.