Discussions with family members lately have been frustrating as our views mesh and then separate when discussing free market.  Particularly when this discussion turns to the unions impact on the domestic auto manufacturers the older members of the family dig their heals in.  Personally I feel unions have a time and a place, but it’s not now, and it’s not in the immediate US future.  Their strangle hold on the automotive industry is proof positive of a group that got too powerful and greedy.  The cost per hour, per employee,  to produce a car is hemoraging automakers funds.

Truth will be told come February when the bailout money has been used up and we are in the same situation.  The problems are not being addressed, money is being thrown at the byproduct of a failed business model, and the American taxpayer is left holding the check.  I would expect more of the same once Obama finally takes office tomorrow, so how many more years before the US economy starts making a comeback?

No amount of bailout money will help the domestic auto manufacturers, specifically I’m looking at GM, but all suffer the same problems.  Only going back as far as 2007 sales figures we already start seeing a problem not fixed by money alone.  There are serious underlying issues within management, union affiliation, and a handful of other issues that cause the domestic car makers to hemmorage money.  Two months of operating money from the tax payers will not fix these issues.

Based on an article written in November 2007 by the Detroit News, Toyota posted a profit of more than $14.9 billion profit.  Their sales figures for 2007 were projected at this time to be around 8.93 million vehicles sold world wide.

The automaker raised its annual vehicle sales forecast to 8.93 million worldwide, from 8.89 million projected in May.

Another similar article reported on GM’s standing during 2007, which was written in February of 2008 by the International Herald Tribune.  The GM article was written with a radically different view of the automakers sales figures, stating that GM lost $38.7 billion in 2007.  The same article goes on to identify the number of vehicle sales for GM world wide, which was 9.4 million.

Sales grew 3 percent in 2007, to almost 9.4 million, barely enough to retain its title as the world’s largest automaker over its surging Japanese rival Toyota.

So here we have two articles discussing domestic versus foreign auto manufacturers sales figures.  Both companies sell nearly the identical number of vehicles, even GM selling slightly more, yet HUGE differences in their profit margins.  GM wasn’t even hoping to make it into the black come 4th quarter of 07 and 08 hasn’t been any friendlier to the books.

Why The Big 3 Should Not Receive Bailout Money

To summarize, two competing companies, dealing with comparable products, selling comparable amounts of units, post a difference in earnings for the year of $53.6 billion.  Toyota being the company who remained in the black, profiting $14.9 billion, and finally taking over the leader in car sales worldwide in 08.  However, as tax payers we are expected to believe that $50 billion will solve their woes, that even being spread out over the big 3 and not JUST GM.

Also, lets not forget that in September we issued a $25 billion loan to the Big 3, three months later I don’t think you can put a fire out by throwing more wood on top.

Currently being drafted is a bill that will allow the largest government intervention into our financial free market since the 1930′s.  According to industry analysts and obviously those on capital hill, it’s a required step to secure both the US economy and others.  So why aren’t ‘others’ stepping in to help foot the bill?  Again it looks like the US is left holding the smoking gun and will help provide for the entire world, since the tentacles of AIG were far reaching and not just here in America.

As usual we are happy to do our part.

For further reading on the bail out of all the financial institutions follow the links below: (sources)

WallStreet Journal

CNN Politics

MSNBC