Sunday, December 07, 2008

"Big 3" Auto Bailout? How many mistakes can one Congress make?

A step back in History:

It's 1979, and Lee Iacocca, Chairman of Chrysler, has successfully convinced Congress to guarantee 1.5 billion in loans to the corporation, with taxpayer dollars, because this would help revive the all-American Corporation. There was even a specific plan - Chrysler's "K-Car" would catapult the company into profitability forever, and an american icon would be saved.


Today, the so-called "Big Three" - GM, Ford, and yes, Chrysler...are seeking billions more in assistance, using the same tired arguements and promsiing the same eventual victories if they could just get "a little help."

It is one of those cases where if you say things often enough, people believe it. "Big Three?" You can find this phrase repeated over and over in the media.

But here are October's auto sales figures:

GM: 168,719 units sold
Toyota: 152,278 units
Ford: 132,278 units
Chrysler: 94,530 units

Some Lessons:

1) They are NOT "the Big 3." Consumers have clearly spoken, and they've been saying "Toyota" for some time. Congressional action to prop up Ford is tantamount to using taxpayers dollars against the taxpayers themselves. We have already spoken: Toyota has given us what we wanted, at a price we want. Don't force us to bailout the companies we did NOT choose.

2) GM is the largest auto manufacturer world-wide. Since when does the Government seek to bail out the largest company in a competitive field? If GM can not make a profit when it has more car sales than any other company, it is time for them to radically change: split up, reorganize, bust the UAW - but dont seek tax dollars for "same old same old."

3) Ford, GM, and Chrysler ceded the small car market to Honda and Toyota. They lost, folks. That's what business is all about. In the 1500s, Spanish Monk-Economist De Albornoz wrote that "when businesses experience profit and loss, and since when they make a profit, they keep it, they must not transfer a loss to the people."

The Market has clearly chosen. Congress, the UAW, and the so-called "Big-3" don't like the results.

Too Bad. Live with it. Capitalism doesnt guarantee success, and neither should Congress.