Wednesday, November 19, 2008

Ctrl-Alt-Del for Automobile Industry. All is not lost.

As of late the big new buzz word in Washington, on TV, throughout the web, and around water coolers is "bailout." I'm hear to tell you, you are going to have to get used to it. Why? Liberal social entitlement spending agendas are exactly that - a bailout. Arguably, we have just taken the biggest step towards socialism in over 230 years of our nations history, the Emergency Economic Stabilization Act of 2008 was passed - a bailout. And lastly, we have three of our countries largest corporations, Ford, GM, and Chrysler asking for US$ 25 Billion in "relief" - a bailout.

Loans are one thing, but bailouts of this kind are pretty much wrong any way you cut it. It is a especially wrong to award one to an industry that has ignored all the signs in the market. It's not that there was an attrition in demand. But if you claim to be a supply-sider... Well, no better example than the energy industry right? Government that favorably rewards any segment of industry over another should not be tolerated. No one thinks about the all the jobs that Americans have working for foreign auto makers in the states neighboring Michigan, Ohio and the like. No one thinks about the unfair advantage these corporations are going to receive, while other competitors who, arguably, are doing just as poorly, may have to layoff workers due to their decreasing market share.

This is not to say that the alternative, a chapter 11 or worse yet, a chapter 7 bankruptcy will be any easier to swallow. A lot of experts agree that a pre-packaged chapter 11 that would look favorably on any of the big three is a long shot. The biggest challenge there will be the unions, and the support they will receive. One should not forget where that support will come from. The very people that fostered this mess will most likely block any attempt of the big three to break union contracts. Certain congressmen have long had the ear of the innocent auto worker unions, whose hands are clearly inculpable in all their doing. At least one of their brethren, Representative John Dingell of Michigan, will no longer be chairing the House Energy and Commerce Committee. To that, we can all say good riddance.

None-the-less, there is no miracle awaiting Detroit's auto makers. It is pretty easy to look at the industry playing field and point at the lack of hybrid technology from American manufacturers, but even Toyota's sales are down 30% this past September. Everyone is hurting. Fear and doubt are the root cause of this mess.

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