Auto Bail Out and Unemployment

A quick thought on the auto company bail-out. While it does not directly relate to unemployment, the result of the bail-out will affect the number of people applying for unemployment. The companies that do not get a bail-out may be forced to lay-off hundreds, if not thousands of workers. This will in turn hurt many people in those geographical areas affected by even more lay-offs.

The fact is however that these three companies are in seriously different situations and should not be treated as equal. Ford is clearly in the most stable position of the three. They are looking for a back-up loan in case the economy gets worse. They are confident that they can survive without government money as long as the economy does not keep its downward spiral going. Plus, if you look at the ratings for cars in magazines such as Consumer Reports, you will see that Ford’s vehicle ratings are way up from years ago. You will not find any new vehicles, other than the Ranger which is a long time hold-over from years past, rated as bad. In fact there are many vehicles that are recommended buys by Consumer Reports. This makes Ford the company that should get the loan guarantees a certainty.

GM on the other hand has too many brands that are just failing. They need to get rid of the dead weight. I do realize the fact that the federal and state governments have seriously hampered the ability of a car manufacturer to just eliminate a brand. It takes years at a significant cost due to dealer buy-backs and payments that must be made. Still, they need to get rid of the crap and they can survive. They are also the largest of the three and employ the most people and that should be considered in an economy that is in need of jobs right now. But, many of their cars are still being rated as unreliable or just plain bad. They need to clean house now and get straight.

Chrysler is the exact opposite of the other two. It has the least number of employees and unfortunately for them should be allowed to fail. The truth of the matter is that Chrysler was purchased by a Hedge Fund. The sole purpose of a hedge fund is to invest in unregulated, highly speculative markets, companies and industries with the potential of huge returns. The hedge fund people don’t want to play by the government rules and should be allowed to do so, but they also need to accept the fact that when they fail, they fail. Huge losses are always the downside of seeking huge returns. They did not invest to make an American company great again. They invested to build it up and sell it off and make a huge profit, which I am not against. But, they invested in a risky venture and should be told no for a bail-out.

Sorry to all of the potentially new unemployed out there, but we cannot just hand out money to every company. Let Chrysler fail. Make GM contract with a bail-out. Give Ford the loan guarantees with strings attached.