The Automaker Bailout – EPIC FAIL

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It has only been a few weeks since the bailout of the US financial market passed through congress and the US auto industry has jumped up to get the slice of the pie. This isn’t the first time that US auto manufacturers asked for federal help, (see Chrysler bailout #1) and it certainly wont be the last, if they succeed that is. Gas prices have dropped and SUV sales have started to rise again, but they still want help. They need help because they cannot compete in any section of the market except in the SUV slice, and even there they are losing ground to overseas competition.

The question on my mind right now is, what the hell happened to free markets? It used to be, that if a company could not compete, it would die, and another would take its place. It was a process of ‘creative destruction’ and it is the basis of any free market. Keep up or get out, it is that simple. The big three, Ford, GM and Chrysler are asking for $25 billion dollars to keep up with foreign competition, and they threaten us with loss of jobs and general financial collapse if they don’t. In return they vow to look into alternative energy technology and fuel-efficient vehicles, but this is just political fluff to stay afloat for a little while longer. I don’t buy it.

By now, you might have guessed that I am opposed to this bailout vehemently and it has to do with their track record and their business plan. These companies have spent the better part of the last 50 years sitting on their asses, raking in profits while churning out the same lineup of vehicles with slightly different looks. At the same time their competition invested billions in R&D. Let’s, for example, take a look at a new V8 Mustang, one of the more popular American cars. It features a monstrous 4.6L V8 engine that only puts out 300HP. Subaru does that with an engine half the size and twice the reliability. Ford even brags about the Mustang having a solid-axle rear suspension, a technology that has not been used by any civil vehicle for 30 years. Yes, it goes fast in a straight line, but it also kill’s you when you try to turn, and that’s not much fun. In fact, going through the spec sheet for one of these I noticed that the things they tout about are simple bolt on upgrades, like new headlight bulbs and interior ambient lighting, and absolutely nothing substantial or innovative.

It is no wonder then that they cannot compete when it comes to fuel-efficient vehicles. I will concede that this has a lot to do with the fact that gas has always been much cheaper and more abundant here than in most places around the world. There was no need to spend money researching and building better and more efficient vehicles, when the old ones were still selling like hot cakes. The 1970′s oil crisis should have been a hint though. 30 years later, they still consider 25mpg a good gas millage and now they expect us to bail them out for their short sided decisions. They also trying to sell us on the idea that they need this money to research fuel-efficient systems and electric cars, but what about the Saturn EV1, or the Ford lineup of hybrid vehicles? They have the technology, and have had it for a while, so what’s the money for? Even if they didn’t, the Tesla Motors company was able to make a beautiful and ever so fast fully electric sports car without billions.

I ask again, what the hell is the money for? It might have something to do with unions. I think one big problem that these companies have, that is not entirely their fault, is that they are slaves to the unions, most predominantly UAW. Don’t get me wrong, unions had their place in history and served a purpose, but now these corporations are full of overpaid and under worked employees that strike at the smallest inconvenience. They are forced to pay people outrageous wages (about $72/hr on average), account for over-burdensome healthcare and retirement costs and are stuck with employees who barely do any work, some of whom don’t do anything but sit around all day. They cannot even fire people who perform poorly and are instead forced to pay them six figure sums to quit. This leads to cars that are built poorly, look ugly and use old technology, not to mention the fact that they often lose money per vehicle made. The thing that these unions don’t understand, or simply don’t care about, is that they have brought these companies to their knees, and in turn are forcing them to fail. When they do fail, close their doors and no longer are able to pay, who will provide for their healthcare and retirement? I sure as hell don’t want to. So a company, like Toyota, who does not employ a unionized workforce, knows that all of its employees will show up sober and ready to work Monday morning cause they know they can easily be replaced. Unions are supposed to protect the workers from being exploited, but in realty they’re exploiting their employers to the tune of billions, that might get passed onto the rest of us.

So, what can be done to save the American auto industry? Throwing money into the union pit is like, well, throwing money into a pit. The only long term solution is to do away with unions. I don’t have an answer for how to do it, but I know as long as the unions control these companies, they will not be able to survive. The only solution I can think of is for these companies to go completely out of business (or at least close all US plants) and sell them off to 3rd party investors that will start from scratch. Anything short of a total overhaul will not fix the situation. I don’t condone outsourcing jobs, but when your own workforce is pulling you under, you need to get out of town and start fresh.

For the actual cars they build, they need introduce vehicles people want to own. They need to be good looking, well performing, fuel efficient and most of all quality built. No more steel wheels with plastic hubcaps, cheap plastic interiors, underpowered big block V8s and solid-axle suspensions. Modernize! Take a page from BMW, Honda and even Apple and see what they are doing well. Invest money in F1, Touring Car and Rally racing (not just NASCAR). A lot of modern technology has come from those motor sports.

Finally, the government. The cracker jack box full of idiots that run this great nation of ours. Please listen to what I say, because its common sense, and you all seem to lack it. STOP TRYING TO FIX THINGS, YOU ONLY MAKE THEM WORSE! The beauty of an open market is that it fixes itself. It is the collective body of consumers that run the market, and it is our confidence in specific companies and the market overall that drives its growth. When you bail out a company that should fail, it undermines the confidence and destroys the faith we have in the market. If they fail, they fail, but sooner or later there will be someone that will come along to replace them and the industry will recover, but it will be with quality and innovation. What you should do is put in incentives for companies to thrive and succeed. Insure the low return safe investments that should pay out, do pay out, even if the company tanks. Cut taxes on domestic vehicles, relax regulation and offer perks to those consumers that do purchase US vehicles. Stimulate the market, don’t try to control it.

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