Ok...now there's another industry crying over its shrinking bottom line and inability to compete.
"It's truly one of those companies that's too big to fail, and everybody understands that,'' said Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts. ``If it does collapse, it could make the recession deeper and longer.''
Behravesh said a GM bankruptcy could send the U.S. jobless rate as high as 9.5 percent, up from October's 14-year high of 6.5 percent, and produce a recession as long as that of 1980-82. Ford Motor Co. and Chrysler LLC also might be at risk.
(Bloomberg.com Nov12 2008)
For those who do not remember, Chrysler asked for and got a similar bailout from Jimmy Carter in 1979. Then Chairman John Riccardo was quoted as saying. "We are extremely encouraged. This fits the bill."
'It was designed to prevent the nation's No. 3 automaker (1978 sales: $13.6 billion) from sliding into a bankruptcy that could have put many thousands out of work and sent a shudder through U.S. financial markets.' (Time, Aug20, 1979)
Sound familiar?
What exactly has changed in the past 30 years? Why is it when a large corporation that has grown beyond its ability to support itself, the hat comes out and asks not the faceless government, but Joe the Plumber and millions others like him to shoulder that burden? And why the hell should we?
I'd like to hear your ideas.
the auto industry is merely suffering from an impossible situation: sustained general gluttony of overproduced goods.
when was the last time you bought a car? your parents? your grandparents?
"Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital extended on it...but this cannot be the case with respect to all commodities."*
Over-production generally occurs only in societies whose basic needs are already met (based on consumption habits of mainstream america, ours are); at this time economically, people haven't been consuming like the auto industry expected because of other conditional factors.
Auto industries need to innovate to make money (more money than the other guys, anyway - which is the driving force for competition in the marketplace). And as you asked, what exactly has changed about the fundamentals of cars in the past 30 years? How does the average vehicle's mpg rate today compare to those of the 1970s? My point is the auto industry's technology seems stagnant; if car manufacturers keep making cars better year after year...why do they expect you to buy a new one all the time?
I would hate to see that job loss, and I'm sure politicians don't really want to see that happen to their constituents, so they'll come up with a slapdash rescue plan that's pretty much equivalent to stuffing a crack in the hoover dam with some gum. I would much rather the bailout have some mandates that the money be spend on R&D instead of marketing or compensation packages for executives.
*Karl Marx, Crisis Theory
OK...let's take this a step further...think along with me for a moment:
What if the recent 700billion dollar bailout had not gone directly to the banks, but to the
average Joe the Plumber? Not a handout but used to pay off mortgages with a balance of $200,000 or less? The minimum number of mortgages paid off under that scenario would be 3.5 million. That's 3.5 million homeowners who would suddenly have an extra...what...$1500/month on average? What could we do with that extra cash? Maybe buy a new GM car? Purchase health insurance? Save for college? Invest in a new small business? Play the market?
The point being is we need to rebuild the economy from the ground up...not the top down.
Best Regards
Chuckhoek