This week the Auto Industry took another major hit by the way of GM's week outlook and failures to create an effective plan to bring the company back. With over $27 billion in debt the company is looking to acquire a bailout of $14 billion from the government to help ease the pain. There announcement of a weak restructuring plan of firing 47,000 employees, closing 5 plants, and ending 8 brands did not bring any extra confidence from Investors. The company is in a rut one that i believe will be almost impossible to pull out of. Chryser too is in the same position asking for another $5 billion despite receiving $4 billion only a short time again. Both companies are Bankrupt with Ford soon to follow. It is time the Government cuts the costs and tells the Auto Makers the honest truth that failure is inevitable whether it comes now or five to ten years down the road. Ever since May i have been a large opponent of both the Auto Industry for several major reasons. Increased minimum wages, costs of material have made it impossible for the American economy to produce a product cheaper than foreign nations such as Brazil, China, and India. America is no longer built around the Auto Industry and mass production. It was nearly 30 years ago where we first saw the failures in the American Automakers. It was the problems of high oil prices and foreign competition that caused failures back then and are leading factors in today's crisis. Times got so bad Chrysler had to ask the government for a helping hand just to avoid bankruptcy. Yes the bail-out helped keep Chrysler moving but it failed to save the company or help lead to top-to-bottom restructuring as we see Chrysler back on Congress's doorstep asking for another bailout. This is why i have very little confidence that another bailout will have a different outcome. Detroit is in such a mess that I see little chance they will ever come back. Their plants and equipment are old, they continue to produce low quality products, and the union-based management is unproductive. Despite major reconstruction costing billions of dollars it is a fantasy to expect a successful turn around. Even Economic Nobel Prize Winner Paul Krugman agrees that nothing can save the auto industry saying "the lack of willingness to admit the failure of a large industry in the midst of an economic crisis is a failure by the Government." It is time to stop the funding and end disaster. The American Government also needs to take in hand the opportunity cost they will lose by attempting to save the Automakers. Current numbers estimate that millions of jobs will be lost if they crash. This is true yet there is no need to have these employees be out of work for much longer. Currently the Auto Industry uses mat amounts of labor, physical/financial capital which could be better used in healthier industries with positive long-term outlooks. American needs to put an emphasis on new industries such as American Oil, Pharmaceuticals, Biotech, and Software. The U.S. needs to invest their money to help grow these successful businesses further rather than artificially supply failed companies capital. Ultimately, we need to stop penalizing success to reward failure.
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