Let’s face it; we need to save the auto industry. Autos are probably our largest manufacturing base, as well as the buyer of products from other manufacturers. Steel, tires, electronics, as well as a number of other areas are dependent on autos makers for their work. We then get down to the local economy, the auto dealers are probably the biggest single source for sales tax in any community, as well as an employer in the community. If all businesses face layoffs from the loss of the auto business, guess how much this will cost the government. I’m not an economist, but I’m guessing that the costs of losing the U.S. auto producers will cost more than keeping them afloat will cost. That’s if we can actually make this a bridge loan, to help them get back in shape.
The auto companies have been hurt by a double tap, the energy crisis made all the car designs that were selling gangbusters before gas went close to $5.00 per gallon an anchor around the dealer's neck. They had few energy efficient cars in the pipeline, and a bunch of big gas guzzlers sitting on their lots. They started giving rebates, and other incentives to move the vehicles, this cost them a ton of money. Then the credit markets froze up, and they couldn’t get any more money to keep their business running, and their customers couldn’t get a loan to buy a car anyway. Car sales were almost cut in half in a very short timeframe. Did the carmakers make mistakes? They sure did, but normally they would be able to borrow money, make the necessary changes and work their way out of trouble. A few bad quarters, the stockholders take a hit, and the world moves on. Not this time.
Of course, when the automakers came to Washington, they sure weren’t thinking, private planes, Mercedes limos at the airport, no need to explain what they were going to change, no mea culpa for how they got to where they are. What were these guys thinking? They should all be fired for gross stupidity, just for this performance, if nothing else.
Before we give the auto companies a penny, we should demand a new business plan. If I’m going to open a new business, I need to present a business plan before I can get a loan, why should the auto companies be different? It’s obvious that the auto company’s current business plan is broken; they need to revamp things before they get on the right track. Of course, we set a precedent of giving money without conditions when we gave the financial institutions money with no real strings, and that worked out so well, but let’s learn and ask for a business plan this time.
As with any investor in a company, we can make demands as a condition of the loan. We are worried about the energy of the future and we can demand that the auto companies follow the government’s plans for energy independence, and that new and different cars be built, let’s face it, they’re using our money, so they should do it our way. The money needs to be a loan, like any other, with terms and conditions that make sense. The automakers need to make changes, and they need to move forward trying to meet the challenges of a new world.
GOOD LUCK
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Posted by: AYC Group LLC | November 29, 2008 at 08:42 AM