Friday, November 21, 2008


The U.S. economy is in peril and the word of the day is "Bailout." Congress has agreed to bailout banks, financial institutions and insurance companies. Now the auto industry is lobbying for their piece of the pie and looking to Washington for huge sums of money to keep them afloat.

The auto industry is one of the major manufacturing industries in the United States. It is reported one out of ten jobs depends on this industry. If the "Big Three" (Ford, GM, and Chrysler) go out of business our whole economy could crash. Ford and General Motors are losing over one billion dollars per month and could run out of cash by the end of the year. This is very sobering news and has gotten the attention of Speaker of the House, Nancy Pelosi, and Senate Majority Leader, Harry Reid. Both leaders have called for immediate action on new legislation to help the auto industry in addition to the $25 billion in low interest loans already approved in September of 2008. They want to pump more money into an already losing industry.

Now may be the time to make the hard choices that will force the Big Three to change the way they do business and get back into sound business practices. The government could bail them out, which will not guarantee any sea change in the way they do business. Poor management decisions in the past have led to poor results in the present and no hope for a future. A better choice, instead of a bailout, might be bankruptcy. It sounds harsh but it could be the bitter medicine needed to save this ailing sector of our economy.

If the auto makers were to go into bankruptcy they would be protected from their creditors and would be able to restructure their debt while they still remain in business. Bankruptcy would enable them to shut down plants that are not profitable, renegotiate union contracts, and bring on line new products that are cost effective and fuel efficient. An interesting side note is that the Big Three are doing very well overseas. It is in the domestic market and production facilities where the trouble is. Now is the time to face the ire of the unions and tell them to face reality. They can either save jobs and renegotiate contracts that are more in line with good business sense and the rest of the working class, or they can be shut down and unemployed.

The Democrats have just won control of both houses of congress and the White House. The question is, do they have the political will to stand up to one of their largest voting blocs; union workers. It will be interesting to see how this economic dilemma plays out. The future of millions around the country and the around the world are at stake. Which will it be? Bailout or Bankruptcy?