Thursday, December 04, 2008
You know, hearing about this auto bailout is starting to get to me. Why are these companies going to the government for these large sums of money to help them out? Why is that okay? I knew that after the $700 Billion bailout was passed through Congress that companies were going to begin coming out of the wood work. Can they use the $25 billion out of this money? Not that it makes it any better. Dana Perino has said that we need to conserve that money and to use it for its intended purpose “…stabilizing and strengthening our financial system." I guess this doesn’t qualify as stabilizing/strengthening our financial system. Okay… If that’s not enough, GM executives say the $25 billion loan money would come with enough strings attached to it that they are not sure it can be used to solve their cash crisis. So, WHAT DO YOU WANT THEN?!
I do understand that if “The Big Three” (GM, Ford and Chrysler) go under that there will be approximately 2.5 million people will become unemployed if these business go under. However, while all of this is going on, I hear about the COO and CEO’s of these companies’s arriving in Washington in their privately owned jets instead of flying commercial like the rest of us struggling Americans. They are the reason we are in this mess to begin with. It was their bad business decisions and uncompetitive labor agreements which began this mess. Many people claim that the bailout will only postpone the inevitable anyway. Someone said that, “Failure of one of the companies is necessary if the economy is to work properly.” Their problems are their own doing, but now the rest of America has to save them. Where do they think this money is going to come from?
Well, and then think about this – if a bailout doesn’t happen then bankruptcy certainly will. What will happen if these companies go bankrupt?
1. Buyers would be unwilling to buy from a bankrupt automaker because of fears about resale value and warranties.
2. The company, along with credit analysts, has also questioned whether it could get financing to reorganize while in bankruptcy.
3. If GM were unable to pay its bills, it could be forced to liquidate and sell off assets rather than reorganize. And if it can't pay its creditors, auto parts suppliers would suffer and many would likely fail.
4. Still, bankruptcy would be tough. It would mean shedding numerous brands and probably thousands of dealerships, and entail closing plants and laying off tens of thousands of hourly workers.
5. 2.5 million jobs
6. Spending by auto company employees who lose their jobs would hurt stores and other businesses in cities where plants are located.
The advocates of a bailout insist that the risk of failure is too great - that even the best case scenario for bankruptcy would be too great a shock to the struggling U.S. economy. The critics say a bailout would be throwing good money after bad - something the government can't afford to do after already promising close to a trillion dollars for other bailouts.
So, what is the answer? What should be done?