Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Tuesday, October 28, 2008

Where Does the Generosity End?

Today reports are that GM and Chrysler are going around, hats in hand, asking for a portion of the bailout/rescue. They want to merge and to win over $10 bil of the $700bil "bail out/rescue" package. And they are eligible by law because they, along with any retail chain that issues a credit card, are chartered as thrift holding companies, so they can establish banks to make loans nationwide. So now the Treasury Secretary is going be the one picking the "winners" and "losers" in the market?

Both of these companies are suffering GMAC is 49% owned by a capital management firm, Cerberus Capital Management. Its share price has dropped 78% so far this year. Chrysler was so useless, it was dumped by Daimler . They justifies there claim to some of the bailout, saying that thousands in Detroit would be put out of work, auto parts manufacturers and suppliers would default on debt, and pensions would be at stake, and the mandate that government has given them to make alternative energy vehicles would fail.

But the bottom line is that Detroit has failed time and again to learn any lesson from the market. Foreign automakers , in particular Japanese and German manufacturers, have overtaken them at least different three times over the years because American Automakers never respond to the market, preferring to DIRECT it. They loose every time. They put all of their money into development of SUVs . They put next to nothing into smaller cars and trucks despite all the signs that rough timers were ahead. They fought CAFE standards.

I hate to tell them, but all the best hybrid vehicles are being produced by Honda and Toyota now. The $25 Bil promised by Congress to these companies to build alternative fuel vehicles is a protectionist waste.

A merger won't help. When you produce cars no one wants to buy, and you join up another company, that also produces cars people don't want, that isn't exactly a model for success. Workers will still be laid off. Pensions will still be cut or lost and these guys will be back in Washington in another 3 years asking for another handout.

We've bailed these guys out too many times. It's time to let them die. If we bail out Detroit, who's next? Where does it end? Mervyns? Nope. It's closing. Linen n' Things? Nope, they are liquidating. Time for Detroit to the same. And maybe some new start up companies with genuinely great ideas can come into being.

2 comments:

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