Thursday, April 30, 2009

Let the Big 3 automakers go bankrupt: then see what's left


Rumor has it that the United Auto Workers and the US gov will own GM. UAW gets 39% and USA 50%. If the thought of the Union and the US gov running GM isnt scarey enough for you consider the following. The UAW has bargained with the big 3 auto makers as a unit - basically, the UAW was a union monopoly. The big 3 had little choice but to "bargain" with them. then came the foreign car imports. GM and UAW knew they couldnt compete cost wise, so UAW and big 3 agreed to employee buyouts, some closures. UAW protected the most senior members. Foreign imports cost about $2000 less a car than GM, ford or Chrysler cars, so they couldnt make money on cars. but the gov has a 25% tariff on imported trucks, AND, the gov didnt count passenger trucks as cars that had to meet mpg fuel standards. So, the US gov made a deal with UAW, the Big 3 - make a profit from truck and SUV sales. Since the Big 3 knew they couldnt make money on cars, the quality of cars declined. Now we are part of the global economy - china plans to make suv's in Mexico and import them. And the price of gas went up, as a recession was building. the end product is that the Big 3 cars have a reputation that is bad, even though the cars are good - the new malibu is good, ford has some great cars too. Even their good cars wont sell now, give their past reputation, and the recession. (the big 3 once made great cars, like the Corvette split window coupe shown). The Silverado truck is still the best selling GM product. But what will happen when the UAW is both owner and union? with the US gov the majority owner?

My vote: let the Big 3 go bankrupt. At this point, the taxpayers will not get their bailout money back. Its gone. so just let them go broke without more bailout money. the more money the US gov gives them, the more money the taxpayer will lose.

The problem is that the Big 3 operated in a government regulated industry - between the UAW and the US gov, the Big 3 had little control over their destiny.

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