Memo to My Government: Stop Throwing Good Money after Bad

The current environment presents the perfect opportunity for the government to just say "enough is enough."

Our government has already pushed billions upon billions into GM and Chrysler.  Less than 2 months later, they are back at the trough.  Chrysler is asking for another $5 billion and GM is asking for something like $12 billion.  These numbers will go still higher. 

These companies (and Ford as well) have proven themselves unable to build a product that can compete on the global marketplace.  The US demand for cars has fallen from 18 million units to 10 million, and the global demand has fallen from something like 200 million units to around 90 million.  This transition may be due to the current economy (in which case it may one day recover to a higher level), but the competitive environment also plays a factor (Toyota and VW make cars that last forever). 

Our incumbent car manufacturers cannot build a competitive product and there are many reasons for that - one is the burden of organized labor.

The US can compete in all areas of transportation innovation, but not in the current format.

Let's let GM and Chrysler go.

Herman Kline
Herman Kline: Herman is a recent graduate of Wesleyan College with a strong interest in finance and firm belief that General Electric is a scam on the public perpetuated by Jack Welch and Jeff Immelt that will ultimately fail to do hidden off-balance sheet liabilities. Herman's favorite place is on the side of a mountain or rock climbing wall.

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Comments

  • soczie

    February 18, 2009

    I am starting to think that the government is just trying to enable an orderly liquidation of the auto industry which makes sense if it saves all of the suppliers.

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