Is the Auto Bailout a Good Thing?
You can’t pick up a paper or go to a single news Web site without seeing some kind of story on the government’s attempt to fix our economy. Now that the prime interest rate is near zero and the first $350 billion has been doled out to financial institutions, one might ask what have we now accomplished? Is it better now than before?
Well, the bleeding isn’t over yet. After many hard fought political battles, we have just approved bailing out the auto industry. We’ve agreed to give $17.4 billion to Chrysler and GMC, and they have three months to come up with a viable business plan. Personally, I’ve never heard of it working that way: “We agree to give you huge sums of money and we want you to come back in three months and tell us how you spent it to become better.” I don’t really see that as a workable plan.
The big question is, should we be bailing out the auto industry? People have strong feelings on both sides. If we don’t, it could lead to Armageddon. If we do, it may just be staving off the inevitable and may be a complete waste of money.
Personally, I’m still stinging a little bit over how the banks and various financial institutions have handled their bailout. A news story today on MSN.com revealed that $1.6 billion of that money went directly into bank executive’s pockets. Some of you may recall a story about AGI sending its employees to a spa and golf outing to the tune of $440,000, less than a week after receiving an $85 billion loan from the government. Read about that here. Another story broken by the Associated Press today revealed that most of the companies that benefited from the bailout either cannot account for, or are unwilling to account for where all that money went. Read that story here.
From my perspective covering the RV industry, I can tell you where it didn’t go – it didn’t open up funds to finance flooring for dealers, and it wasn’t made available for RV consumers to purchase new RVs. In fact we’ve seen many of the financial institutions who serve the RV industry, either pull back, or remove themselves from our industry.
This leads us to the auto bailout. I think we have seen how well the government does in ensuring that taxpayer’s money is well spent. There are a host of rules the auto industry will now face that the financial institutions didn’t, but the government’s track record isn’t very good. It appears that a number of dealerships will have to close for these two companies to become viable. Those dealerships have contracts that will be violated. This means that large sums of our taxpayer’s money will be paid to them to reconcile and part ways.
The RV industry doesn’t always work this way. We have seen a number of RV manufacturers go out of business and RV dealers completely lost out. They are stuck with inventory that has no warranty and finding replacement parts is questionable. Some dealers even now are owed large sums of money for warranty repairs they did in good faith that they will never be compensated for. Thousands of people have lost their jobs in our industry and we haven’t seen any bailout. This makes it hard to empathize with the auto industry.
So, what do you think? Does the government even have the ability to effectively bring the auto manufacturers into viability? Should we bail on or bail out the auto industry? Does this have any implications to our industry, often compared to the automobile industry? Is this issue impacting your decision, as a dealer, as to which RV manufacturers you are willing to partner with?
March 16th, 2010 at 7:27 am
[…] In an interview after DiMassimo’s presentation, Carr Davis, co-CEO of Cygnus Business Media Inc. …RVTradeDigest.com Blog Is the Auto Bailout a Good Thing?RV Weekly: Is the Auto Bailout a Good Thing? … They do not necessarily reflect the opinions of RV […]
December 31st, 2008 at 2:16 pm
We should all be upset to this so-called bail out. this money that they are handing out, belongs to the tax payers, these companies who are yelling for help, got themselves in their present predictament. through mis-management, these so called hot shot leaders of these companies are thinking of themselves and not of the welfair of our economy, and the tax dollars they are seeking to bail out the holes they have dug for them selves. Our so called leaders in our present Goverment are being sold a bill of goods, that we the people are going to loose big time. these companies can’t guarantee that these loans will be payed back. all they have to do it take the money and file bankruptcy a few months later, what will our leaders do then. with over $300 billion given out to these so-called companies, we ought to let them go bankrupt now, spread that $300 billion with the paying tax payers, that would give the common man over $300,000 each, which they could use to pay off there mortgages, buy new vehicles, our housing problems would go away, our auto industry would be behind in demand of new vehicles. and lets face it, our goverment doesn’t give the common man a break. so when they hand out this money to the tax payers, they can tax each person 25% on the money, deduct it up front before sending out the checks. the goverment would get back about 1/4 of this money, back into the treasury which would help to pay off part of our national debt. but do you think our Reps in goverment would think of this. I think not. their to stupid to think about the overall picture, which would help out the common man.
December 29th, 2008 at 4:19 pm
The only way to fix the car industry is to let the manufactures go bankrupt so they can get rid of the archaic unions rules to achive parody with the foreign car manufactures.
December 23rd, 2008 at 11:58 am
Track the money back, you might find some of it gets back to the to the folks handing it out. Rember one hand washes the other if a little bailout cash sticks to them both all that could be done is to wipe those hands in your pockets to be rid of it. What is a little graft amoung friends?
December 23rd, 2008 at 8:57 am
Sometimes the best way to help someone is not to. I feel that a government backed bankruptcy would be the best thing for the auto manufacturers. Insuring that warranties are maintained while allowing them to reorganize or even sell. Maybe Buffet wants to build cars too. Union labor is the biggest factor in their demise.
Building cars with 70+ dollar a hour labor and then trying to sell them to consumers making 15 dollars a hour.The RV industry will not get any help at all. We are a lot more reluctant to take on a new manufacture do to the chances that they will not be around next year.