Tuesday, October 28, 2008

Who's Next Onboard the "Socializing America" Train? It's the Automakers!

From the September 29 R.C. Blog:

"The Congress and Federal Government need to get out of the business of providing unlimited financial support, bailouts, incentives, and plum financing to private enterprises. It has been going on for decades and is spiraling completely out of control with this latest problem. If Congress sets a precedent for federal bailouts of private companies that have a tremendous impact on the economy and stock market, who will be next? Ford? GM? United Airlines? The auto and airline industry already get significant "financing" and incentives from the government, but they'll come looking for much more after this bailout package passes."

As predicted, the "others" would soon line up and they are. Any bailout of the auto industry in America is merely a band-aid on a much larger problem.

The "real" problem with the Big Three is the same problem they have been dealing with since the 1970s -- the unions. If the Big Three operated with the same workforce and efficiency as Toyota, Honda, and Nissan, they would be in a much stronger financial position.

When the unions went away from protecting American workers from unfair labor practices in the early and mid 20th century and began holding the private sector hostage to outrageous demands for pay, health benefits, work hours, etc., it began taking its toll on U.S. business. This is the core reason why the U.S. manufacturing industry in the Midwest is already gone and why the automakers are next. It may take another decade or so, but the Big Three will die or get gobbled up by the New Big Three -- Honda, Toyota and Nissan...

I've said it for years, and I'll say it again, American unions are crippling American business. They were vital at a moment in time when the American workers were being treated like slaves (read "The Jungle" by Upton Sinclair); today, they are simply a thorn in the side of American ingenuity and productivity.

From today's news wires:

Momentum is building in Washington to aid wounded U.S. automakers with cash to help their finance arms and possibly even money to help seal a deal for General Motors Corp. to acquire Chrysler Llc.

Officials "at the highest levels" of the Treasury, Energy and Commerce departments have talked to top automaker executives on the topic, presidential spokeswoman Dana Perino said yesterday. "It's a possibility that they could qualify under it."

Congress recently authorized $25 billion in low-interest loans designed to help automakers develop new energy efficient technology but to also help keep the companies afloat amid hard times.

Each of Detroit's Big Three automakers are burning up cash as the U.S. auto market downturn continues with no end in sight. Analysts say GM and Ford are spending more than $1 billion per month more than they bring in. They add that GM could reach its minimum operating cash level of $14 billion sometime next year. GM's sales are down 18 percent, and the company has lost $57.5 billion in the past 18 months, although much of that comes from noncash tax accounting changes.

Chrysler's figures are unknown because it's a private company. But industry analysts say the automaker apparently is in the most dire condition, and its owner, Cerberus Capital Management Lp, is in talks with GM, the combined Nissan Motor Co. and Renault SA and others about selling the company.

Perino said that the administration is "working as quickly as we possibly can" to finalize the regulations necessary to release the $25 billion in congressionally approved loans to automakers, but she wouldn't put a specific time frame on it or rule in or out any further federal aid, beyond the loans, to stave off bankruptcy by any of the U.S. automakers.

Republican presidential candidate John McCain and Democratic presidential nominee Barack Obama have called for the $25 billion to be expedited. Obama has also said the loan program should to be doubled to provide $50 billion.

The slump has set off fierce lobbying on behalf of the auto industry ahead of the U.S. presidential election, with supporters arguing that a bankruptcy of an automaker would have a cascading impact across the country.

David Cole, chairman of the Center for Automotive Research, estimated that a failure of GM or Ford could threaten as many as 2 million jobs.

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