Thursday, July 31, 2008

Bailouts are not the Answer

In the late 1970's, Chrysler Corporation was in trouble. They failed to adapt to higher gas prices and newer anti-pollution standards. Chrysler Chairman Lee Iacocca went to Washington and managed to convince Congress that they could turn things around if the Government would give them a low interest loan. It took some time but Iacocca made good on his promise. Chrysler developed a new kind of vehicle called a minivan and the rest is history, Chrysler was the leading minivan company for nearly two decades. This and an overall improvement in their entire product line allowed Chrysler to pay back the loan - something most people (myself included) doubted they would be able to do. Chrysler, during the 1990's, had a bright future by being smart and creative.

These are not those times.

General Motors, Ford, and Chrysler are all in serious trouble. They are losing billions of dollars each quarter. As in the 1970's, they didn't have the foresight concerning their slant towards large vehicles - large cars in the '70's and trucks and SUV's now, would come to an end. GMC Yukons, Chevy Silverados, Ford Expeditions, and Dodge Rams and the like were big moneymakers for these companies. So much that even Nissan, Honda, and Toyota began building behemoth vehicles to grab a share of the pot of gold. They are suffering for this action too, now. Not as much though since these companies have their Prius', Civics, Sentras, and such to fall back on.

What do the so-called domestic companies have?

Chevrolet has never had a highly rated small car. Chevettes, Cavaliers, Aveos, and Cobalts are typically at the bottom of most lists. They weren't any better in mid-size either until the current Malibu came out. Dodge had a decent small car in the Neon. They had good compact cars in the Stratus and Cirrus in the mid 1990's. However, Chrysler, under the control of Daimler at the time, utterly failed to update these vehicles and they eventually diminished. Only Ford isn't completely hopeless. They have had a competitive fuel-efficient vehicle in the Focus. The Fusion and Escape Hybrid indicate that they have a clue, but it hasn't been enough.

"The big 2.8" (Daimler still owns 20% of Chrysler) are losing billions of dollars and want the federal government to get them back on their feet. Translation; They want us taxpayers to fork over the bill for their inadequacies meaning we're supposed to pay the price for not buying Fords, Buicks, and Dodges. They argue, of course, that if they go under, thousands of jobs will be lost, not just by their own employees, but in all the dealerships, mechanics, and smaller companies that contribute to the makeup of their vehicles.

It's time to cut the cord and force these companies to fend for themselves, despite the consequences. If they work smartly, these companies have a good chance to survive and grab back what they had lost. Otherwise, they will fail because they deserve it. I believe Charles Darwin's theory of "Natural Selection" applies here. If the government bails them out, why should these companies change their ways when they know they have the taxpayers as a safety net?

Unfortunately, both Presidential candidates are trying to get votes from Michigan by promising aid to the auto companies. They are both wrong and this is really very un-American. America is the land of opportunity, remember? That means one company's failures are another company's opportunities. Maybe it's time for some other company that's is driven and is better able to plan to fill the void. If the 2.8 fail, that's a lot of talented people out of work. Opportunity knocks.

I feel the same way about the bailouts for Fannie May and Freddy Mac. Let these companies die if they made such bad mistakes.

That also applies to people who made bad choices concerning their mortgages. Let them foreclose. Let the housing market stabilize because of free-market balance, not because of artificial, tax-payer paid bailouts.

This is all about responsibility. If we don't exercise it, future generations will pay.

Sunday, July 20, 2008

So, Why All The Misery?

Okay, so gasoline is pushing $5 a gallon. Prices seem to be leveling off for now but there's no indication that they'll go down any time soon. Let's look at how this is affecting us.

We are driving less.
We consolidate our shopping - no more going to the supermarket to get a loaf of bread. Also, more of us use carpools, take buses, ride on rails, or even simply decide we had no reason to drive in the first place.

We are dumping our over sized vehicles
Suddenly, small, fuel efficient vehicles are in vogue again. Monster pickup trucks, candied-up SUV's, and V8 sports sedans have suddenly lost their allure. For those who want or need a pickup truck or SUV, these are good times too since dealerships are overstocked and are offering tremendous deals (I've seen 1/3 off of sticker on some).

We are polluting the air less
All these smaller vehicles and less driving add up to less air pollution. For those who consider carbon dioxide as a pollutant, we're even spewing less of that.

We are looking at alternative fuels
Natural gas, bio fuels, hydrogen, and pure electrically powered vehicles are being developed. Everything is still in a pre-larval stage but we have reached that point where the "gas is cheap" argument has finally gone away.

So I ask the question. Isn't this what we wanted? Isn't this all good? Shouldn't we be dancing in the streets since we are finally getting what we've been demanding for 40 years?

So, why all the misery?