Friday, November 14, 2008

Don't bailout the auto industry

From the 17 November 2008 Greater Niagara Newspapers

By Bob Confer

You’d be hard pressed to find someone who supported the $700 bailout of Wall Street. Most folks were up in arms over how taxpayer money – our money! - was used to reward Wall Street’s excesses and bad behavior. This ire, which was shared by pretty much everyone except for Congress and Wall Street’s bigwigs, was well-intentioned and a real breath of fresh air. It was nice to finally see so many people that upset with Big Government.

Even so, I can’t help but to walk away from that uprising with a sense of pessimism directed towards the masses. I have to feel that way when I see how selective they have been with their criticism of 2008’s ongoing “New New Deal”. Where were the critics when Uncle Sam issued the economic stimulus checks? Where were the naysayers when we covered homeowners’ bad mortgage decisions? Why didn’t the media throw a temper tantrum over the government’s buyout of AIG or its cash infusion to the banks?

It’s all because people are mad only when it’s convenient for them. Their anger, their resentment, surfaces only when it’s not they or their interests who are at the financial feeding trough. Because of that selectivity, the federal government has run roughshod over our economy, making FDR’s historic efforts look almost pedestrian. By focusing only on the aforementioned $700 bailout, the media and citizens of our nation have virtually ignored the cornucopia of bailouts, buyouts, stimuli, infusions, loans and the like bestowed upon us the past six months. So far this year Uncle Sam has doled out $2.950 trillion of those giveaways and we still have a long ways to go before the economy can even begin to be healthy. Without the masses pulling tightly on the checkrein, the fed will no doubt feel obligated to issue more rescue plans which might include the salvation of credit card debtors (card debt now stands at $970 billion) or the confiscation of 401k accounts.

Nothing is out of the question unless we make a stand now. The line has to be drawn somewhere, sometime, somehow. There is no better place to start than the next item on the government’s things-to-do list: the bailout of the US auto industry.

As I was writing this column top level officials were still debating what to do to save the industry, specifically General Motors. GM was fearful that come December it would be totally out of cash and bankruptcy would occur. Based on recent history, giving them a bailout would be something akin to giving the keys for the liquor store to the alcoholic who says he’s learned self-control. By believing the loser you’re only feeding his bad habits and guaranteeing his death.

GM’s woes were brought on by its addiction to operating under sales techniques that were developed by manufacturers in the 1800’s and have been obsolete since. Back in the day, manufacturers would build to supply and not to demand, more or less dictating what the consumer would buy. Back then, the manufacturer defined the market. Nowadays, with so many choices available, the consumer defines the market and the manufacturer adjusts accordingly. GM hasn’t adjusted and is still making vehicles that the consumers don’t want, hence its cash flow problems: GM can’t sell that which it has made. Ignorant to ongoing fuel scare issues that have been with us since the 1970’s and oblivious to the burgeoning green movement, GM is putting out too many trucks and SUV’s, only dabbling in the smaller vehicles that are less expensive or use less energy…the very cars that people want and are buying from the highly-successful new American auto industry (the foreign firms who manufacture on American soil). With GM, it’s always too little too late.

Basically, the bailout – once again, our money - would only go towards temporarily masking the weaknesses of GM’s management. It would give them the cash they need to get through their current financial crisis, but, with the status quo as it is at GM, the taxpayers would never see a return on their loans because of the perpetuation of bad business practices.

The same criticism was said of Wall Street. Yet, because of how beloved the auto industry is, there are very few people who will levy those charges against GM. Even so, there are fewer people who will say with confidence that GM is doing the things necessary to change its ways. It’s destined to die, whether it’s December 2008 or December 2011. The bailout will be but an investment in that demise, the government rewarding bad behavior, just as it did on Wall Street.


John Restaino said...


I believe this is a loan. It is a shame that the Big 3 are going to be left for dead because of the Banking bail out. This is al about breaking the union. Once again the GOP favors business. Ever wonder why the Righties never go after the Pfizer or HMO's ??

Bob Confer said...

The GOP and Democrats are all guilty of doling out welfare here. Whether it's the banks or manufacturers or Average Joe getting's all wrong. I really think Darwinism should be allowed to work its wonders on the markets.

Bob Confer said...
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John Restaino said...

Do you think waiting for the Free Market System to work this out is a conservative way to deal with this?? When I say conservative I don't mean Right or Left. When something doesn't work what do we do??

Bob Confer said...
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Bob Confer said...

We let the week die and new companies take their place. We let the market re-invent itself.

Look back at the 1800's/early 1900's when some of the massive rail and steel companies died...people thought the whole economy would die. It didn't. It became a better economy.

Americans will always need and want cars. Whether they get them from GM or Honda what's the difference? They'll still be made on American soil by American hands. The auto industry will survive without GM. As a matter of will rock!