GOOD MONEY AFTER BAD
The Big Three Auto Makers are in deep trouble with little hope of surviving in their present form. Yet, Congress is throwing more of our tax payer money at them with little chance for repayment.
Career members of Congress are anxious to acquire large campaign chests to fulfill their personal ambitions of staying in office. The campaign contributions, usually on a regular basis, come from contributed special interests. Members of Congressmen and Congress women repay, in kind, for the campaign donations by acceding to special interests wishes that are, too often, contrary to what’s best for the average American.
The automobile industry and their unions are among the large contributors to members of the national legislature. Congress is in the process of passing a $25 billion loan to General Motors, Chrysler, and Ford, to aid these corporations to meet the new federal fuel-efficiency standards. A few years ago, these same car companies were awarded $25 billion by Congress to produce a diesel engine capable of 70 miles per gallon efficiency within a specified number of years. At the deadline, the Big Three auto makers reported that they were unable to produce this capability. However, they didn’t return the money.
In the $700 billion bailout there is authority for the Federal Government to assume bad car loans. Bad car loans have the added disadvantage of the continuous depreciation of the asset (automobile) so that an extremely large percentage of these loans will be a total loss. Given enough time, the bailed out banks will probably recover; some of our tax payer money may be repaid. There will be no repayment from Chrysler, Ford and General Motors because they will not recover:
· their employment costs are roughly $1,500.00 per car higher than their foreign competitors,
· their management is prone to cling to their old fashioned, buggy-whip mentality,
· and their tardiness entering the fuel-efficient car market leaves them far behind in this technology.
Toyota has 79% and Honda has 11% of today’s hybrid car market. It will be extremely difficult to overtake these two aggressive competitors.
The only chance that these car makers have to succeed is through a complete reorganization, i.e. bankruptcy. Through bankruptcy labor contracts, indebtedness, and management can be revamped to make them competitive again.
Sadly, these tax payer loans and bail outs will be used to pay the generous salaries of the executives of these companies. Even worse, these corporations will use our bail out money to contribute to Congressional campaign funds and lobbyists in order to get special favors and even more bail outs. It seems what goes around comes around at our expense, throwing good money after bad money. You can thank your Congressmen for this exploitation of our personal resources. Expect an income tax increase in the near future to fund all this nonsense.