The Franklin News-Post
P. O. Box 250
310 Main Street, SW
Rocky Mount, Virginia 24151
540-483-5113
Fax: 540-483-8013
|
|
 |
|
|
|
Wednesday, November 19, 2008
Where will the federal government draw the line?
Major U.S. companies seem to be lining up for bailout money from the federal government. The debate is now centering on the big three automakers -- GM, Ford and Chrysler.
Heads of those companies have been making their case for a $25 billion lifeline, in addition to $25 billion already proposed to help the auto industries retool their factories to make more energy-efficient cars and trucks.
Industry leaders are saying the companies could be facing bankruptcy if emergency funding is not approved. But bankruptcy may not be a viable option, they say, because the problem is simply too big. In other words, financial reorganization is not enough.
The end result, according to the industry leaders, could mean a loss of millions of jobs in the plants and ancillary services tied to the auto industry.
We don't pretend to be economic experts, and we're beginning to wonder if anyone is. They all seem to disagree on what course of action to take. Some say take no action at all -- let the chips fall where they may as they would for any business that files for bankruptcy.
After all, many critics of a bailout say it's the companies' own fault for poor planning, especially in the area of producing fuel-efficient and hybrid vehicles. The writing was on the wall many years ago to retool, and they failed to do so.
The companies have also been criticized for the huge salaries and bonuses for executives.
Some of the obvious questions are related to the $700 billion bailout of the banking industry. If car sales have dropped overall about 40 percent in recent months, primarily because car loans are more difficult to obtain and consumers are jittery about the economy, will that bailout help reverse that trend? Won't car companies start selling more cars when the credit market is more relaxed, thereby boosting their bottom lines?
And with dealerships sporting huge inventories, what incentives can the companies offer consumers to start moving all those vehicles? As with any company making a product, a way has to be found to move inventory.
Chances are, a bailout package will be passed by Congress, but we do hope it will at least have some strings.
One would certainly be to build more fuel-efficient/hybrid vehicles. Although gas prices are far lower now than anyone would have imagined just a few months ago, that's most likely not going to be permanent. Predictions are for prices to eventually rise again once the global economy is stabilized.
The sales of hybrid vehicles have been a bright spot in the industry, and that trend will most likely continue.
Another string should be limits on the outrageous bonuses and so-called golden parachutes given to industry executives. As was the case in the banking industry, top executives were being given millions of dollars while their companies were literally going down the tubes. What sense does that make?
Taxpayers should also be assured that the bailout is a loan that will be repaid. The auto industry is not going away. Americans love their automobiles and, at some point, will start buying again. If they sink money into the big three automakers, they should see a return on that investment, not be stuck with a mounting national debt that could eventually bankrupt the country.
Who will bail out the United States?
|
| |
|
|
|
