Aid for U.S. Automakers? Not a Good Start

By Jim Wiandt

Obama's lead with aid for automakers is not an auspicious start.

It's hard for me not to comment on the sort of lead economic pronouncement of the coming Obama administration... aid for U.S. automakers. To me it's right up there with Bush's opening with steel tariffs when he started 8 years ago. Let's take our least efficient, most poorly run and least competitive industries and prop them up. Great idea!

What you ought to be doing is investing into strength, not weakness. I have never understood both parties' tendencies against free trade. It doesn't make any sense. Isn't this the home of laissez-faire capitalism? Ultimately free trade leads to the greatest common economic strength. That does not mean it should go completely unfettered. We should be regulating for fair working conditions, no child labor, etc.

But we should not let special interests write regulation and we should not throw good money after bad. Will there be pain in a transition away from the weaker parts of the economy? Yes. But ultimately our economy and the global economy will be stronger because of it. Enough with the (corporate) socialism already. Free trade is GOOD. It's good for the U.S., it's good for the world. There, I've said it. How and when did it become a bad word? YES, I LOVE NAFTA, yes, I'd LOVE fewer tariffs and more REAL free trade. And remember, I'm a former Peace Corps volunteer AND Wall Street guy. So I must know what I'm talking about.

I know Hougan is going to say that I'm just bitter holding onto that GM stock over all these years. But I really believe these things. U.S. automakers have been run so poorly for so long and are so noncompetitive, that we ought to let our economy just finish its process of moving away from them.

I would love to hear your thoughts if anyone differs with me or supports me. Are index investors free traders? If you're looking at your portfolio, you probably OUGHT to be. Do you want your index to be holding GM or GOOG?

Comments

[investor88]

There you go, you have hit the nail on the head. I was scratching my head when Obama championed bailout for auto, wondering whether this is a good move. It's clear from your article that it is a bad move, it's done to please the crowd. If this is way the US goes, the economic pain will be prolonged rather than a short one. Let the old and dying go, peacefully - this is the law of nature for one and all. Then there will be rebirth and a new beginning.

2008 Nov 12 10:13 AM

[Repper]

Your intentions are good, and I would agree with your premis, but I think you are oversimplifying the issue. In the long run, perhaps 'survival of the fittest' would ulitmately be best, but in the short run failure of the domestic auto industry would send us from this downhill slide into a recession to an allout freefall into a depression.

Now I'll get on my soapbax about people who love to bash the US auto comapanies when they know very little about the industry at all.
The management has been doing all they can do make these comapnies right themselves. The Unions and legacy costs have been a great weight, slowing things down, but the recently restructured contracts can help that in the future.
Cerberus thought that they could come in and fix all the management problems at Chrysler, but they got there and found out that the auto industry is incredibly tough and competitive, and all the chages they would make were already in place. They couldn't do any better.
Truth is, the US auto companies are as well run as any in the world. They have just been hit with a lot of really tough outside conditions in addition to being continually punished by american press and consumers for their sins (complacency) of decades passed.
I'm SO sick of people blasting the products produced by the US automakers. The OBJECTIVE TRUTH is that they are building world class quality cars and trucks with world class fuel efficiency. Compare styling and they blow Toyota away. GM’s products are the benchmark in many segments. Look at the data! And [really] look at the cars!
The problem is the perception that keeps getting perpetuated that they don't build good cars and trucks. Many won't even look at them because of this ridiculous, pervasive misconception.
Yes, they had problems in the 70’s, 80's and early 90's. They got very complacent, and their products suffered. The companies have changed drastically since then, they HAVE BEEN doing the right things, but since so many consumers have written them off for past sins, they are having trouble getting some people to even look at domestic vehicles. Now with this perfect storm of the economy, and their legacy costs they are obviously hurting.
Letting them fail would truly send the economy into deep depression. Apparently most don't realize how much this manufacturing base effects every part of our economy. Yes, it hurts to say we're gonna "bail them out", but all they need is affordable loans to continue on the RIGHT path of building great vehicles and getting ahead of the competition with alternative fuel technologies. The American public would do the most for their economy if they would just CONSIDER buying American. It would help 'themselves' as well because the government can make a good deal of money from these loans (see the Chrysler "bailout" of the early 80s).
Before blindly bashing, please give a real look at the products that are being produced today and educate yourself with the facts. Try visiting gmfactsandfiction.com/.../ . Yes, it is compiled by GM, but all the facts included are from third-party sources to which links are provided. Dispel your misinformed misconceptions about GM and the other domestic auto makers.

2008 Nov 12 10:48 AM

[BNC]

There are many benefits to bailouts and I believe that a bailout should be provided to GM but only if restrictions are put in place to ensure that bonuses are not paid to the top management for a set period. Restrictions like that should be put in place not just for the auto industry but for a bailout plan provided to any industry.

2008 Nov 12 01:41 PM

[DrunkenOlives]

Amen ! Well stated Repper


On Nov 12 10:48 AM Repper wrote:

> Your intentions are good, and I would agree with your premis, but
> I think you are oversimplifying the issue. In the long run, perhaps
> 'survival of the fittest' would ulitmately be best, but in the short
> run failure of the domestic auto industry would send us from this
> downhill slide into a recession to an allout freefall into a depression.

>
>
> Now I'll get on my soapbax about people who love to bash the US auto
> comapanies when they know very little about the industry at all.

>
> The management has been doing all they can do make these comapnies
> right themselves. The Unions and legacy costs have been a great weight,
> slowing things down, but the recently restructured contracts can
> help that in the future.
> Cerberus thought that they could come in and fix all the management
> problems at Chrysler, but they got there and found out that the auto
> industry is incredibly tough and competitive, and all the chages
> they would make were already in place. They couldn't do any better.

>
> Truth is, the US auto companies are as well run as any in the world.
> They have just been hit with a lot of really tough outside conditions
> in addition to being continually punished by american press and consumers
> for their sins (complacency) of decades passed.
> I'm SO sick of people blasting the products produced by the US automakers.
> The OBJECTIVE TRUTH is that they are building world class quality
> cars and trucks with world class fuel efficiency. Compare styling
> and they blow Toyota away. GM’s products are the benchmark in many
> segments. Look at the data! And [really] look at the cars!
> The problem is the perception that keeps getting perpetuated that
> they don't build good cars and trucks. Many won't even look at them
> because of this ridiculous, pervasive misconception.
> Yes, they had problems in the 70’s, 80's and early 90's. They got
> very complacent, and their products suffered. The companies have
> changed drastically since then, they HAVE BEEN doing the right things,
> but since so many consumers have written them off for past sins,
> they are having trouble getting some people to even look at domestic
> vehicles. Now with this perfect storm of the economy, and their legacy
> costs they are obviously hurting.
> Letting them fail would truly send the economy into deep depression.
> Apparently most don't realize how much this manufacturing base effects
> every part of our economy. Yes, it hurts to say we're gonna "bail
> them out", but all they need is affordable loans to continue on the
> RIGHT path of building great vehicles and getting ahead of the competition
> with alternative fuel technologies. The American public would do
> the most for their economy if they would just CONSIDER buying American.
> It would help 'themselves' as well because the government can make
> a good deal of money from these loans (see the Chrysler "bailout"
> of the early 80s).
> Before blindly bashing, please give a real look at the products that
> are being produced today and educate yourself with the facts. Try
> visiting gmfactsandfiction.com/.../ . Yes, it is compiled
> by GM, but all the facts included are from third-party sources to
> which links are provided. Dispel your misinformed misconceptions
> about GM and the other domestic auto makers.

2008 Nov 12 10:26 PM