Tuesday, November 18, 2008

GM Bailout

Yes, I'm a bad blogger. What can I say? A new expansion to World of Warcraft came out last Thursday. So if you wonder what I've been doing? You're correct! Playing SNGs on Full Tilt while I wait on the queues. It still amazes me how upset people get about poor play at a $2 SNG. TWO DOLLARS? Who is playing a $2 tournament and expecting to play vs Barry Greenstein? Jeezus.

Anyway, I've read many a blog about how bailing out the auto industry would be wrong and awful. They all read the same: the companies suck, the management is stupid and hasn't done a thing to improve themselves since the sixties.

Of course I am biased. I don't work for any of the US automotive industries, but I do depend on them for my IT job. If they go under, so do I.

Here's my admittedly biased perspective.

The management knows more about the auto industry than any blogger you read. They are not idiots, it's a tough job. The competition for the auto dollar is unimaginably intense. If you think you could do better within the constraints of the current market, well you're completely wrong.

The bailout isn't like the banking industry bailout, but it is needed for the exact same reason. The auto industry needs loans, not a handout. The banks got CASH. The reason they need it is because credit is FROZEN. There's no money to borrow out there. The auto industry needs working cash to survive until the market picks up and people start buying cars again. According to estimates that will be summer of 09 at the earliest and summer of 2010 at the latest. Since there is no credit to be had, the only thing automakers can do is borrow from the government.

This isn't unprecedented. The government gave the exact same style loans to Chrysler and the loans were paid back. The "bailout" was a big success. Yes Chrysler is in trouble again, but it is because the entire auto industry is in trouble.

Yes I said the ENTIRE INDUSTRY. The Japanese car makers are in trouble too, that's why they have ALREADY received bailouts from the Japanese government. Their auto industry is just as important to their economy as ours.

The comparisons to the US autoworker and foreign autoworkers are unfair. It's always a direct comparison, the UAW worker costs GM X dollars, the Japanese company worker gets much less. But Japan has national health care. GM pays for health care for its workers, so it's an apples and oranges comparison. Yes the US worker still makes a lot more, but the comparison needs to be leveled out a bit.

If you worked in the auto industry you would see that they have taken great leaps to try to become more competitive with automakers around the world. I see them EVERY DAY. Sure I don't agree with some of them, but you have to look at some, such as the turn over of health care to the union, saving GM over 4 billion dollars a year, as steps in the right direction. Even within the unions there are huge changes that make a ton of good sense. Maybe it's too late, but if you say they're not trying you're completely wrong.

Do I think the government should be in the business of bailing out the auto industry? No, not really. But since the government seems to be in the bailout business anyway, I definitely think that an industry that touches 4.5 million working people and over a million retirees should be included. Especially when all they need are loans. The US auto industry is NOT hopeless. There is a lot of money to be made in the industry, and abandoning these companies would be flushing that money down the toilet.

If the big three are forced to liquidate, estimates show that unemployment will be above 30%. With that many people out of work, I'd bet that those economic turn-around estimates would have to be changed from summer of 2010.

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