Saturday, November 15, 2008

To bailout or not to bailout the Auto Industry? UPDATE

I wrote a recent post, Nov. 8th, on the proposed bailout of the Auto Industry (see post below). In summary I had said that while initially I didn't think it was a good idea, when you look into the issue in more detail, a bailout is a good thing as long as it is conditional that first the company had to file for bankruptcy but were required to have all the workers own the business. All non employee shareholders would lose their equity under the new restructuring but the employees would be given some % of the shares of the new company. Their elected Union representatives would be on the Board with an equal vote on where the business was going and had to approve of the plans. What this industry needs is accountability across Labor and Management. They must bury their past grievances and agree to a true partnership. Their Benefits would need to be trimmed significantly in a cost cutting measure, and they would need to equally share the pain. The government would act as the Arbitrator of last resort if issues remained and would have final say over ultimate decisions, as a condition for the billion of dollars given in the bailout.

This morning several experts on the Auto Industry are quoted in this article (worth your time to read fully) on Bloomberg.com that "GM Collapse at $200 Billion Would Exceed Bailout Tab". Quoting further from the article, "A GM collapse would mean 'more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh's projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers."


So it seems a no-brainer we must rescue the Auto Industry after any like GM declares bankruptcy or we are cutting our nose to spite our faces. No one wants socialism. We all want Free Enterprise to return. But we are in a world wide crisis of historic and epic proportions which require unusual, once in a lifetime remedies. The article did not include the costs of default Mortgages by Auto industry workers unable t pay for their mortgages. But we have a chance to create an Auto industry that leads us into the future where we do not burn fossil fuels to run our autos. You see even cheap gas is bad, as it does nothing but add to our problem with Global Warming and that has catastrophic consequences for the entire planet.

President-Elect Obama will lead us into becoming the leader of Green technology on the planet with jobs that make people feel good about what they are working on, similar to when people like myself worked on the Apollo Moon program under the Kennedy Administration. It was a glorious time and nothing like that has been offered by any President since. There is no option here. We must save the Auto Industry and an additional $25 Billion is a paltry amount compared to not bailing them out.

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