To save or not to save?

The big 3.

Over the years the big 3 automakers have dug themselves into a hole that now threatens their existence. As you probably know, they are petitioning congress for at least 30 billion dollars to keep their doors open through April of 2009. We could flesh out the topic of our legislative body acting as a payday loan office, but why don't we save that for another day.

At this point the overhead of the automakers is crippling. Consider that the average salary, including benefits etc. is somewhere in the range of $75/hr. That is a staggering figure, compared to the nation wide average $28.50/hr and to Honda's $43/hr. Their current situation is also based on poor managment and planning and a sub par selection of product based on the current market. This in and of itself is an interesting predicament since the Clinton/Gore administration had stepped in to create some growth and incentive with the Partnership for a New Generation of Vehicles, a program to help B3 develop high-efficiency vehicles. But then again, a billion is just chump change these days right?

Some people may point at the failing economy and assume that the automakers are simply a product of a poor sales environment. Yes, the economy is weak but growth is still possible. Consider this: an early 2008 study shows the B3 losing nearly 38,000 jobs by 2011, meanwhile those would be offset by a projected 38,000 jobs CREATED by foreign auto makers.

American Airlines went through bankruptcy in 2002, which came with some Federal help to the tune of 5 billion. This was a huge savings over any bailout though. If the Government goes down the slippery slope with this check then the B3 are destined to return in a few months with their hands out again. They claim that 1 in 10 jobs in America is connected to them and that their failure will destroy the economy. This is a little far fetched, espeically sine they will still be able to operate through a bankruptcy process. Why not allow them to go through the process and slash their costs and negotiate their debts? Cut the crap brands, pontiac, mercury, saturn etc. Allow the court system to over rule the crippling UAW and get them back on track?

Mitt Romney didn't mince his words when he said that "you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed. Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check." The premise being that Detroit needs to be save from itself.

And lastly, how about a merger? Isn't that how the rest of the country works? The small and weak are bought by the large and powerful? Why should Detroit be spared from these same market forces? Newsweek compares this situation to the Boeing/ McDonnell Douglass takeover in '97 and Wilbur Ross and LTV steel in 2003. A purchase that say 17 steel companies shrink to 3 within 2 years and go from a 1 billion loss to a 6.6 billion profit during that same time.

So now I'll put the question to you. Bailout or no bailout, why?