Detroit Deserves To Go Broke
Dec 4th, 2008 | By Bill Bonner | Category: Politics & EconomicsThe Detroit automakers deserve to go broke, says Bill Bonner. They were well positioned in the biggest market for autos in the world, but still managed to squander all their money. And now they want the taxpayers to rescue them.
This from Daily Reckoning:
The automakers are still haunting Washington. They don’t have any money of their own, so they’re looking for taxpayer’s money. GM (NYSE:GM) says it needs $18 billion – bad.
If they don’t get taxpayers’ money, they say they’ll be forced to turn to the Swedes or worse…the Chinese!
We suspect they’ll get a bailout. But what do they deserve?
Here are companies that have been around for an entire century – plenty of time to learn their trade. And they’ve been in the center of the best auto market in the world – the United States of America. If you couldn’t make it in the car business in the US…you had to be hopeless. Nobody bought more cars than Americans.
And these companies had every advantage – they had capital, they had the sales and service networks reaching into every Middlesex, village and farm in the nation. They knew their customers better than any of their foreign competitors. And they didn’t have to ship their cars across an ocean to sell them.
For a half century, it was downhill driving for America’s automakers. But it’s very hard to recover from success. And Detroit couldn’t quite do it. They squandered their money… they missed their market target…they saddled themselves with costs that gave them a disadvantage and hobbled them so greatly it was almost impossible for them to compete – even with the playing field tilted in their favor.
Then, even when asking for a handout Detroit’s executives couldn’t seem to get its signals straight. They flew into Washington on their private jets…apparently unaware that anyone would notice.
What do they deserve? They deserve to go broke.
Source: Going Broke Is What Everyone Deserves
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning and three best-selling books, Financial Reckoning Day: Surviving The Soft Depression of the 21st Century, Empire of Debt: The Rise of an Epic Financial Crisis and Mobs, Messiahs and Markets..
Bonner makes a pat case for letting the fools pay the penalty, but in fact, the fools are management, who will bail with millions and keep on keepin on. The shareholders and the defense industry should they be called upon for intense manufacturing of war machines, are the big losers. Even the workers, whould have left the business long ago for more advancement…yet the Unions, just life government welfare checks, kept the workers living in the rust belt by fighting robotics and economically superior manufacturing process and getting more money and benefits for workers that, no matter how hard they might work or try, can never put more efficiency into their hand production assembly line processes than a human can do…and that has a decreasing value in a world competitive marketplace where foreign manufactures embrace and invest in ever more productive processes and techniques. All the US Big 3 could come up with is to cut the costs per unit by using cheaper and less quality goods, and to pump up the prices on desirable accessories and services.____
__The demise of an industry is not an "I told you so, you idiot" event. And many who are forever damaged did not create nor participate in the decisions made over long times that eventually caught up with an impossible equasion….cheaper and better goods on the market, and a consumer population caught by an economic down spiral unable to buy even if they wanted to. The high use of credit means that the cars on the road will have to be driven longer and harder by the owners, as they have no trade in values, and their is no credit available for cheap purchases of replacements. US investor and purchaser loyalties were strong and sincere in the support of GMC and Ford. But the management and unions destroyed the goose with the golden egg. They are the ones that should "go down."