Bye-Bye Big 3

No more bailouts! That is something to get excited about, but is it going to happen? Detroit has already flown into Washington on their private jets with their platinum cups in hand begging for money. Is it just me or has Detroit been losing money for years and now they’re blaming the financial crisis for losses. Oh no, it’s not the financial tsunami that put the automakers in this pickle it was there own ineptness.

According to the big three they built huge gas guzzlers because the American people wanted them and these gas guzzlers were supposedly hugely profitable. Well let’s look closer into that. The balance sheet of GM indicates that they have lost money since 2005 when the economy was still humming along. Ford is in a similar predicament. They have lost money since 2006. Since Chrysler is now private it is hard to look at their books to see how much they were bleeding, but we can see what they sold for as a gauge. In 1998 Daimler purchased Chrysler for $37 billion and conversely in 2007 Chrysler went private for the whopping sum of $7 billion. Not exactly what you would with a thriving profitable business model.

Everyone knows about the legacy costs and failed bargaining agreements with the UAW that have placed the big three into this situation. It was not the financial crisis, but the inevitable compounding burden that these union contracts have placed on these companies that are to blame. Foreign automakers who build in America average $48 a hour in salary and benefits, but the big 3 average $75 a hour for the same thing. Why the big difference? Foreign automakers don’t have unionized workers and their sense of entitlement.

Bankruptcy would be a blessing and not a curse for the big 3. It would allow them to tear up all non-beneficial contracts including those with the UAW. It would settle current debt issues and provide a clean slate to move forward. Contrary to popular belief filing for bankruptcy does not mean that the kitchen is closed and the big 3 would blow away and never be heard from again.

If the politicians do bailout Detroit then where does it stop? Retailers are suffering, restaurants are suffering, manufacturing is suffering it appears that everyone is suffering so where do the handouts/bailouts/bridge loans end? The only question that remains is will congress act in the best interest of the country and not the lobbyists. The funding for these bailouts comes from loans that WE have to pay interest on for years to come. Why should we pay for 10-20-30 years to come to bailout business models that were failing before the financial crisis and will continue to falter after the dust clears?