Don’t reward Big Three for not knowing how to be profitable

The recent bailout of the financial industry in the United States made me uneasy. White House officials said they had little choice as they doled out $700 billion to buy up bad loans that basically shouldn’t have been made in the first place (and I thought the U. S. didn’t negotiate with hostage-takers). Hard-working entrepreneurs and corporations cringed at the inequality of rewarding poor business practices.

I recognize that some money will return to the government, as the mortgaged assets are sold off, but clearly president-elect Barack Obama will have a lot less money to put towards his priorities, including energy and health care, thanks to the bailout.

Now the Big Three automakers in the U. S. are politely asking for $25 billion. They argue that had the financial collapse not happened, they would have been able to go to the banks for the money. They may be right; the banks were making a lot of bad loans.

Some say that because of this, the government should slide $25 of the $700 billion from the financial crisis straight to General Motors, Ford, and Chrysler. After all, what’s a few billion between friends?

If the banks had loaned them the money a few months back, they most likely would have continued business as usual, but based on their churn rate, by now the money would be gone.

Then, through the latest bailout, the U. S. government would own large portions of the Big Three through mortgaged-backed agreements. Like the other assets claimed in the financial crisis, GM, Ford, and Chrysler would find themselves up for government auction.

But the banks didn’t throw them a lifeline. You’d think by this point management would have drastic contingency plans in place to cut costs and reinvent themselves through comprehensive restructuring plans. Instead, the CEOs went to Washington asking for aid. What’s worse is they went without a plan to show how the money would turn the companies around. This falls into Albert Einstein’s definition of insanity, “doing the same thing over and over again and expecting different results.”

Congress sent them packing (in their private jets). Perhaps the government should agree to shift $25 billion to them, but in return, the Big Three must agree to be sold to someone with the chutzpah to make the tough decisions necessary to run the businesses profitably.

U. S. auto manufacturers are considered dinosaurs, and many are saying their extinction is long overdue. They appear stuck in the tar pits (fossil fuel reference unintended but ironic nonetheless) as streamlined foreign competitors’ continue to leave them in the dust.

So if making cars can be profitable, why should North America’s copycat (or fat-cat) hostage-takers be rewarded for not knowing how to do it, all the while dangling the livelihoods of their employees in front of us for sympathy? Moreover, why should foreign car producers, who are employing more and more people here, have to watch such anti-competitive measures roll out?

While I’m at it, why aren’t executives taking dramatic pay cuts? Similarly, why should U. S. autoworkers at the Big Three get paid more than U. S. autoworkers at Toyota?

Serious concessions are needed from the executives, the unions and their dealers before coming to taxpayers to solve company problems.

Now that our government is being roped in to potentially helping out the auto industry, I want Stephen Harper and Barack Obama to consider two foreign proverbs. The first is Turkish and the second Chinese: “No matter how far you have gone on the wrong road, turn back.” And, “Give a man a fish, feed him for a day, teach a man to fish and you feed him for a lifetime.”

We all realize that the failure of these companies would have a negative effect on the economy, but why bail them out if the potential for failure either way is still very real?

The root of the problem must be addressed. Whether it is bad loan practices or legacy deals padded with a sense of entitlement, you simply “don’t throw good money after bad.”

Bottom line in business is that you need positive relationships with your customers, making quality products they want, at reasonable prices, while controlling costs and managing risk.

If it takes bankruptcy measures for the Big Three to learn their lesson, let them join the airlines and steel industry post-bankruptcy ascending from the ashes.

Bailout or no, there must be consequences and accountability.

For the executives of these companies, here is a North American saying: “Do not pass go, do not collect $200.”

If the Big Three get this bailout, the only question that remains is who will show up next at mom’s door with a sad tale of a misspent youth to get their share of the apple or maple pie?

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