Friday, November 14, 2008

Congress to US Carmakers: Sink or Swim

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With trillions already tabbed for banks and insurance giant AIG, the US automotive industry is being pushed to the side and not getting a seat at the tax money trough:

WASHINGTON, Nov 13 (Reuters) - A senior Democratic senator raised doubts on Thursday that an attempt to bail out U.S. automakers had enough support to clear Congress this year.

As Republicans amplified their concerns about a bailout, Senate Banking Committee Chairman Christopher Dodd raised the biggest red flag for fellow Democrats trying to craft a $25 billion rescue and pass it during a post-election session set to start next week.

"Right now, I don't think there are the votes," Dodd of Connecticut told reporters about prospects in the Senate. "I want to be careful of bringing up a proposition that might fail," he said.
I guess Dodd doesn't have any special friends at GM or Ford like he did at Countrywide but I digress.

Anyway, we have to draw the line somewhere and that somewhere is evidently the Big Three.

Detroit has been turning out an inferior product for decades now with a few exceptions. The Japanese, South Koreans and Germans have been designing and building better, sleeker and more efficient vehicles while GM, Ford and Chrysler have been regurgitating the same old same old for twenty years.

Add to that the inflated salaries paid to those assembling the cars in the US and you have the recipe for lower profits and lower sales. The average UAW worker makes somewhere between $30 and $40 per hour, but not said is that an extra $30 goes on top of that in benefits costs. Those benefits checks fund the pension plan, health care and, of course, help to line the pockets of UAW bigwigs and Democrat politicians. In other words, through greed and poor planning, the US auto makers have such huge payrolls that they've not been able to capitalize on the greatest advantage they have; no tariffs. The tariff savings are used up in payroll costs and not seen by the consumer who, when given the option of buying a Buick or an equally priced Toyota will almost always go with the higher-quality Japanese brand.

President Bush opened up the flood gates by pushing for the bailout bill and is now trying to keep the money from flowing out using a single sand bag and a small pump with a garden hose. It's not going to be that easy as Congress has instant access to trillions of dollars that they didn't have before and the spending will make earmarks look like pocket change. Bush has made a mockery of free market economics and by passing the bailout bill has paved the way for Obama t institute more socialist economic policies that will see spending balloon to the states and cities who are screaming "help!".

It's about time we took a breather and looked at what we have wrought. My guess is that Bush will long regret pushing for the bailout plan and going against a century of American thinking whereby companies that are not solid are than doomed to failure.

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