Broke American Auto-Makers

How can it be that in America where we developed the auto, and made it possible for everyone to own one is now on the verge of bankruptcy?

When a car manufacturer builds a car, it has a manufacturing cost. If that car manufacturer's cost for manufacturing exceeds the costs of his competitors, then his competitors can offer more value for the same money.

Auto manufacturers such as Ford and G.M. try to mitigate their circumstances with smart engineering to reduce their product costs. But even good engineering can only help so much. Labor makes up a large percentage of the manufacturing costs, but pales in comparison to the cost of legacy medical, government edicts, and labor rules that keep non-producing people on the payroll even when they are not working.

A manufacturer may even resort to cutting corners by outsourcing, and failing to correct defects before they start selling the vehicle. In this last year, G.M. sought to buy the medical agreements with a onetime payment to eligible employees. However, the effort did not go far enough as the production cost of every G.M. auto produced has an added premium of about $1600.00 per car just to pay the legacy medical costs of retirees. Of course, there are other costs such as having to keep non-productive employees on the payroll.

The big three automakers agreed to all of the labor terms including retiree medical benefits. But now, the automakers face bankruptcy or a bailout from the Government (read taxpayers). The legacy agreements signed during the good times are not sustainable under present conditions.
The proposed bailout does nothing to correct the inherent problems with the manufacturing costs for the big three automakers. What happens when that money runs out? If the automaker can't make a profit, there is no reason to be in business. Democrats and the unions see the automakers as their property and have been doing everything possible to make sure that the real owners, the stockholders, do not profit from the enterprise.

The three American automakers have no problem manufacturing cars that the buying public wants. But the Democrats have their own ideas about what kind of cars to make. The manmade global warming hoax has given the Democrats the perfect framework to take over the industry. Because the automakers are in such bad shape, the Congress (Democrats) can now dictate the terms for which they will grant the bail out. There is a bonus for the Democrats as it also keeps the unions propped up.

The Socialist model always ignores demand for a product. That is why they mandate things like quotas, size, and type. That business model always fails, and history is full of examples of those failures. Democrats would sacrifice our way of life for their ideas of how we should live, the size and type car we drive, how much we can make before taxing our excess, and legislating from the bench whatever hits their fancy. I.e. abortion, same sex marriage, open borders, and abandoning any restrictions on right and wrong are just a few examples where they want to take this country. If we give in and allow the bailout of our industrial base, then we have surely lost the battle for freedom.

Bankruptcy isn't such a bad word. Assume that the auto industry goes bankrupt. That gives them the chance to reorganize and reconstitute themselves into an entity that might be profitable. The proposed bailout is no more than a gift to the auto unions. It is time to rectify bad decisions from years gone by. It would not be the end of the world, and the result might even surprise us by creating a profitable, resurgent industry.

SAY NO TO Bailouts!!! Let the chips fall where they may, even if they fall on bad management.

Cheers,

-Robert-