hmm... thoughts

Don’t Bail Out US Automakers

All of a sudden, the czar’s of the old guard Big 3 are interested in Washington again. (By Big 3 I mean Ford, GM, and Chrysler, not the real big 3 of Toyota, Honda, and Ford.) The news is full of stories of their CEO’s begging for federal bailout money to keep afloat. I can hear the words from here, “We only want $25 billion.” They probably each took their own corporate jets over there and are staying at $10,000 per night suites.

Here’s why giving the Big 3 $25 billion is a bad idea:

#1 Their problem isn’t bad loans, it’s bad labor contracts. I lived in Detroit for 5 years and I was totally sickened by labor practices. Over the last few generations an entitlement attitude has run rampant among workers. In short, until they can clean house and only keep the best workers regardless of union status or seniority any bailout will just be wasted on pouring more money into a broken vessel. Most people don’t know this, but they pay people not to work! They want federal dollars to keep paying people not to work! For $25 billion we need a federal right to work law. People should have a choice whether to join a union or not. Closed shops should be outlawed in every state… especially Michigan. Face a fact… unions were great at one point, but have helped bankrupt the auto industry.

#2 Their problem isn’t bad loans, it’s over-generous retirement plans. In the last few year’s they have gotten wise and started buying people out. But the Big 3 are levied with a tax their competitors don’t pay… pensions. (Most have been structured on 401k plans since day one.) Until they can shed those pension problems the federal government shouldn’t give them a dime. I don’t think that they should just fore go the pensions. I think, once and for all, they should sell those debts off and let someone try to make a buck on distributing those dollars.

#3 Their problem isn’t bad loans, it’s trying to sell cars people don’t want. Have you walked on a car lot lately? The Chrysler cars mostly look like space ships. The Ford ones look like Tonka trucks. The GM ones look like cars from the 1980s. I know that’s judgmental and I’m uneducated. But I was recently looking to buy a new car and literally laughed on most of the “U.S. Automaker” lots. For 20+ years they have whined about “foreign cars” on their market. The reason people aren’t buying them isn’t because they hate America, it’s because Honda, Nissan, Toyota, Volkswagen, and the rest are selling cars people want to drive.

I have no doubt that the auto industry will get bailed out. They will become federally subsidized, just like the airline and farming industries. If it’s not the $25 billion today it’ll be $100 billion next week. My only hope is that in getting the money they will start to repair the damage.

Meanwhile, I hope Michigan continues to look for a new economy. I hope they invest in the health care industry, technology, and financial industry. Michigan is full of amazingly brilliant people who want to succeed. Let’s hope that they get it sorted out soon!

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Quick Note to Investors

The sky isn’t falling. As all of that money pours out of Lehman Brothers, Fannie Mae, Freddie Mac, and other financials today… just be reminded of one thing. That money is leaving one place and going somewhere else. As you know, there’s a bull market somewhere. It’s not like all of those investors are taking that money and putting it in their savings account.