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The Big Three: Bailout or Bankruptcy?

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I’ve been thinking about this issue for as long as it’s been in the news. Maybe longer – ever since Obama said he wanted help the auto makers retool as a way to create greener cars and keep jobs in this country that couldn’t be outsourced.

I have very mixed thoughts on this issue. I can see both the pros and cons, and neither of them seems to outweigh the other.

On the pro side, if the Big Three go down not only will over 2,000 auto workers be out of jobs, along with potentially thousands more in allied companies who supply the Big Three, the U.S. would be left with no American car companies. No domestically owned auto companies.

Yes, there are foreign auto companies, like Toyota and BMW, who have plants here in the U.S. and hire our auto workers. But those companies are not domestic. Profits are shipped back to the countries of origin, i.e. Japan or Germany. That’s kind of like the whole oil problem: we buy crude from overseas and refine it here. A transfer of our wealth to other countries.

By letting the Big 3 go under, we’d be doing the same thing again. Is that what we want? Or do we want an independent manufacturing base that is able to sustain our domestic needs if need be and to keep our wealth at home?

By providing the monies (a loan, I hope, rather than a free money bailout), the Big 3 would be granted the time to reorganize their companies to become more lean and competitive and to retool to make the cars the future will require without a huge loss of workers’ jobs.

On the con side, the Big 3 have failed in multiple ways and probably deserve to undergo bankruptcy. One of the Big 3 CEOs, I think it was GM’s, said he did not believe in global warming, that it was all a hoax. He also stated there was no need to build fuel efficient cars or cars using alternate energy sources, even though GM has done so for the Brazilian market. His opinions prevented the company from innovating. And opinions like his keep fuel efficiency levels of new models at approximately 35 mph/highway. In comparison, Toyota and Honda met that standard ten years ago.

In addition, if the Big 3 undergo bankruptcy proceedings, the companies would be required to reorganize – become more lean and competitive. Bankruptcy reorganization would require the companies to sever losing products and develop competitive products.

In addition, there are a number of independent domestic auto makers on the horizon here in the U.S. These companies are developing cars that are on the leading edge of technology. These companies potentially could replace the Big 3 if provided “seed” money, rather than giving it failing companies who refused to innovate until they saw a big red smear across their balance sheets.

Even now, the Big 3 have chosen to eliminate research and development, rather than investing in their only hope of survival. They’ve even gone so far as to ignore new innovations in the market, rather than investing in them. The Big 3 are mired, it seems, in old ideas that are no longer applicable to the world’s – and our – economy and mind-set.

I still believe that the American worker is the most productive of any in the world and that they are the most innovative. So, should we allow the Big 3 to continue in an environment in which millions of workers have already lost their job? Should we put even more people out of work when no state can afford the unemployment they’re already dealing with? Should we allow a management staff to continue in place that refused to see the future until it hit their bottom lines?

Or should we give them the money with very definite restrictions on how it’s used, such as retooling, research and development, and innovation, with defined limits on salaries, bonuses, etc. until the companies return to profitability to keep current U.S. auto workers employed and allied companies alive?

Or should we allow them to go into bankruptcy and put our “seed” money elsewhere, into domestic companies that are already taking the lead on energy efficient cars.

For me, it comes down to a social issue versus an economic issue. Keeping thousands of hard working families afloat now when the country is already reeling from a financial crisis, lack of consumer confidence, and ever growing daily news of layoffs that some economists say may reach as high as 8 or 9 percent in the next year. Or do we back the enterprises of the future, without regard for the thousands more workers left without jobs?

And in the meantime, while these new domestic auto companies build up, do we allow even more transfer of our domestic wealth (trade deficit) to grow exponentially?

It’s a hard choice. I’m glad I don’t have to make it.

Out of curiosity, what would you do?

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One Response

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  1. Sounds like a good time for some job sites –

    http://www.linkedin.com (professional networking)
    http://www.indeed.com (aggregated listings)
    http://www.realmatch.com (matches jobs based on your skills)

    Good look to those looking for work!

    Matthew

    November 15, 2008 at 2:03 PM


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