Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0

While I am compassionate, like pretty much anyone I talk to, about the plight of auto workers losing their jobs, I am finding a potential bailout more and more unsettling.  In the news I have just heard about the production suspensions of GM and Ford plantsfor an additional month, as well as the fact that GM is halting construction on a plant, which was slated to produce the company saving Volt (should be called the Chevy Dolt).  This news is not so good, even as it is being touted as a way to reduce costs. A bailout isn't going to solve anything, but it may in fact exasperate an already growing problem.

Here's my reasoning...

1.  We are at a model year end, and if car companies don't produce new models, they have no new products to sell.  Some of you may be saying "that's fine, no one's buying," but with interest rates so low, loans for cars should be cheaper, and yet, no cars are being produced, thus, profits for the "Shriveling 3" will be stagnant at best, slumping more likely, causing their continued plummet intoan economic abyss.

2.  International shipping of cars has caused it's own concern, as ports are unwilling to unload new cars due to the fact that they can't sell and thus just take up room, causing a loss for shipping companies.  Bailing out the auto companies, without first slimming them down (a la Chapter 11) merely perpetuates the glut of products.

3.  Allowing auto companies to avoid restructuring actually hurts them and the consumer more in the long run.  There is a reason the auto companies are not profitable, it was poor management, short-sighted profit taking (Hummer anyone???), and a stubborness born from their own proclaimed "self-importance."  By bailing them out, the American government is becoming an enabler, in effect telling the auto companies that they can't be replaced, which we all know they can be (Honda, Toyota, etc...).

4.   Finally, a bailout locks the car companies into their present labor agreements.  Although two years old now, this link is pretty telling:

http://mjperry.blogspot.com/2007/07/uaw-pricing-themselves-out-of-market.html

I'm a teacher, have a college degree, am working towards a Masters, and I don't make anywhere near the salary of a hourly wage earning UAW member.  While these jobs are probably not the easiest factory jobs in the world, they are still in fact "factory jobs" which means that there is no special college degree necessary in order to perform them.  I do believe that the UAW is a relic from a period in American history when management abuses were all too real and a strong union was necessary just to get fair compensation, but to me, the UAW seems to have completely turned the tables and are in fact representing the abusive powers now.  That being said, by bailing out the auto industry, the U.S. government is allowing and actually promoting this situation, which, aside from the horrible management of the Big 3, seems to be the other area where car manufacturing can cut costs.

Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.