Kavmerica.com

As you have undoubtedly heard President Bush announced today that the Auto Industry will be receiving it’s bailout after all.  A $13.4 Billion dollar bailout to be exact.  The plan leaves out Ford but GM receives $9.3 Billion and Chrysler will receive $4 Billion to keep it’s operations going.

All of that money does come with one major caveat.  The companies that accept the money have to show that they are “viable” by March 31st of next year or they have to repay the loans in 30 days.  A repayment schedule like that is akin to a death sentence to virtually any company, let alone GM or Chrysler.  It is also important to note that this bailout package does not appoint a “Car Czar”.  The responsibility for determining “viability” falls on a designee that Obama will appoint.

There in lies the problem.  President Bush has shuffled along this mess for just enough time to allow himself to get out of office.  In the process he has left a time bomb for Barack Obama.  The President-Elect now has really only two poor options.  If he certifies that the companies are “viable” then it is all on his administration if they fail.  If he decides that they are not “viable” then the companies will be gone in 30 days because there is no way they can pay back that much money so quickly.

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GM, Ford and Chrysler were back in Washington again today to plead their case before Congress yet another time. Just two weeks ago they came before Congress asking for $25 Billion dollars. In that two weeks their request has grown, GM is now seeking $18 Billion and Ford wants another $9 Billion. That’s $27 Billion between just the two of them. The amount Chrysler was seeking was not disclosed at the time of this writing but just two weeks ago it had been seeking $7 Billion. That number surely has not gone down so now we are looking at a bailout in the range of $33 Billion PLUS.

The fact that the amount they are seeking has risen so drastically in just two weeks tells you a lot. The management at these companies is so out of touch they just don’t know what is going on anymore. They don’t even know how much money to ask for, so how are they supposed to know what to do with it when they get it? Would you trust your tax dollars to these people?

Management and high labor costs are killing these companies. How else do you explain a company like GM going from selling 50% of the cars in the US during it’s glory days to now selling between 14-15% of all cars and being on the verge of collapse. That is institutionalized arrogance. How are they going to get back on track when they are so far off the trail they don’t even know where they are?

If the bailout does pass it will be nothing more than a bridge to the next failure because it doesn’t not address key underlying problems. The UAW has done too good of a job over the years increasing wages and benefits for it’s members to a level where it is not sustainable. High labor costs choked the Big Three. It forced up the cost of producing their vehicles so those costs were made up elsewhere. Research & Development and Quality were left by the wayside.

There are quality vehicles made in this country. Companies like Toyota and Honda manufacture them here. They are built by your neighbors, your non-UAW neighbors that is. Funny how they aren’t facing bankruptcy these days but the Big Three are. It would seem that the Big Three have a common denominator in the UAW. It isn’t fair to the Americans that build your Toyota and your Honda that their competition be given a helping hand. It is tantamount to them being punished for doing a good job.

Let the Big Three go into bankruptcy. It will allow them to restructure and become competitive again and do so more rapidly. In bankruptcy a single judge makes all the decisions. He doesn’t answer to the UAW either. Bankruptcy isn’t the end of the Big Three, it’s just what they need.