Wednesday, November 19, 2008

More Bailout Follies #2

The big three say that one or more of them will be bankrupt before the end of the year if they don't get more free money. Let's hope for our sake they are.

Why's that? Well the fix is in with Mr. Change:
Wagoner has warned GM needs an infusion of cash in the coming weeks to prevent a devastating bankruptcy at the nation's largest automaker and cannot wait until president-elect Barack Obama -- who has promised to bail out the sector -- is sworn in on January 20.
Mr. Corporate welfare has a plan though. Obama, Pelosi, Schumer, etc., you know, the same people who told the lending companies who to lend to, are going to tell the automobile manufacturers what cars to build. Ahh that old time socialism, how could that NOT end in disaster? The only thing to be done after forcing Detroit to build a car that won't sell is to give consumers no choice about what to buy.

Another core issue in this whole debate is that the big three need to A) make fewer cars and B) make them less expensively. Unfortunately from my automotive-supplier side seat, when they try to make fewer cars, their economy of scale decreases and the cost for their supplies goes up. This starts a feedback loop where the costs continually go up at the precise moment they need them to go down. The long and short is that they need to find those cost savings from somewhere else, namely the outrageous top to bottom employee benefits.

As a tech dude I've seen computer prices fall year after year while their functionality has gone up. While not everything can hold to this curve, it's unnatural that while the cost on most manufactured items has gone down, the price of cars has continually gone up. That can't last, bailout or no.

On a related aside, I liked this piece by Eric Lundquist on the lack of a government bailout for the dotcom crash. That crash really hit home for me since so many people with my skill set were suddenly dumped onto the market, but I was grateful this alternate history wasn't the end result:
The revolutionary idea that companies don’t need products, expertise or sales was a concept that had to be preserved and encouraged. Without the government’s willingness to step in and grow the dot-com company creation economy, startups would have been forced to come up with real products for which real customers would plunk down real cash. Aren’t we glad that never happened?

No comments: