The Sovereign Mind

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Posts Tagged ‘auto industry

My Questions for the Auto Execs

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I’m listening to the executives of the US auto industry be “questioned” by members of congress today in Washington (yes, I’m officially a policy-geek). I say “questioned” in quotes because about 95% of what the members of congress are doing is preaching, rather than questioning. The argument for the bail-out is that letting the companies go into bankruptcy would cost way more in lost jobs and lots of other financial consequences I don’t pretend to understand. We wouldn’t want all of those hard-working assembly line workers to lose their jobs, right? I don’t disagree that the consequences would be dire, but that doesn’t address my fundamental question:

How would 25 or 34 billion dollars be the difference between bankruptcy and survival?

Common sense says that throwing money at a problem doesn’t fix it. The same business plans that got them in this mess would quickly eat up that money. I’m definitely not convinced that our tax-payer money would do anything more than pro-long to inevitable. In fact, as I’m writing this I’m hearing the executives say that if the economy gets worse, they could be back asking for more. One expert (who is actually in favor of the loan) says that the money we provide them might just buy them time so that they can prepare for bankruptcy (they haven’t already been preparing?).

Still, I’m no expert so I could be very wrong. However, what makes fear that I’m right is this:

If the companies’ current plans are so good and are so certain to make them viable, why are private investors not willing to make that investment?

If it’s such a great investment, you would think there would be people (private investors) waiting in line to give them money. They are the experts, so if they aren’t convinced that their business plans will work, why should I be? One republican member of congress grilled Chrysler about the fact that 80% of their business is owned by a private investment firm who has many other successful investments, but is unwilling to put more money into Chrysler. Hmm, bad sign?

Since it seems the loan is imminent, we will see if I’m right. We will see if the auto companies are back in a few months to ask for more, of if they go into bankruptcy anyway. I hope I’m wrong.

(Side note: any news organization who’s first comment on the auto industry’s plan is that they arrived in hybrid vehicles, or that the CEOs are willing to work for $1 a year, should go off the air. That is fluff, and will have zero affect on the companies viability. Of all the articles I’ve seen, there has been almost no reporting on what is actually in the company’s new viability plans, other than the aforementioned symbolic gestures. Are we as stupid as the media thinks we are?)

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Written by Mike

December 4, 2008 at 10:01 pm

Posted in government

Tagged with , , ,