Do you have someone in your life that asks you to borrow money? There's nothing wrong with a small loan here and there. Sometimes life happens and we should help each other out, it could be us next time that needs a little help.
I'm talking about the person that keeps coming back, and each time seems to need to borrow a little more. We feel for them, but we wonder, what is it about their system/their plan that keeps bringing them to the point of needing more? We're pretty sure that whatever the system is, it doesn't work for them. We even go as far to offer suggestions to help fix the system, but we are told they have it figured out. We are friends, we chuckle about it, then consider changing our phone number. Eventually we stop repeating the insanity and just say no.
Which is why I'm glad I am not friends with the auto industry. They really do need help, I feel for them, but I couldn't do it.
For the record, if they were to ask, I would tell them unequivocally, "No, I will not give you $130 billion dollars, because a) how are you possibly going to repay me with the way you've perfected your system of consistently losing money and all; and b) you just know it will be $250 billion more next time and then you'll owe me $380 billion (awkward); and c) it doesn't matter anyway because I only have 8 cents right now with the market so firmly entrenched in the toilet."
Thankfully, our govt. still has more than 8 cents (because we continue to pay taxes), and could give the auto industry what it has requested. But should it?
-The turnaround plans submitted by automakers add up to massive job cuts. Sure, the layoffs could help the industry move towards profitability but would have a negative impact on the overall macro-economic picture. What have we gained?
-If the bailout for the auto industry is intended to save jobs and really is more of a jobs program, then it should be set up and implemented as such. Throwing money at businesses that have largely created their own problems will not magically make them profitable, in fact, history has shown the opposite.
-So the automakers get more efficient with these turnaround plans - demand for automobiles is way down as people are holding off on their next purchase. Cars may get made more efficiently but there is no one to buy them. What happens then?
The govt. will continue to bailout the auto industry under the "we have to, what else are we going to do, they're our friends" plan. Automakers will continue to lose billions. The govt. will change their phone number. The auto industry will show up at their House. Eventually the govt. will have to say no and then we'll be where we are right now, just short half a trillion dollars as we sit and watch the auto industry unwind itself via the mechanisms (bankruptcy) that are already in place today.
Labels: auto industry, bailout