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To bail or not to bail, that is the question.....

Posted Nov 17 2008 10:43pm
Back from a little blogging vacation, what a difference a month makes! Busy and busier, the time to write and manage posts wasn't quite compatible with... well.... life. Tonight I am able to eek out a few minutes to put keystroke to blog on something I have put some thought to as of late.... the phenomenon of the "bailout."

Done for the right reasons and done strategically, a cash infusion to help "bridge" a vital company or industry is an important action to consider and one not taken lightly.

I have not been shy about expressing my disappointment on where the U.S. auto industry has taken itself. Wasting time and large sums of cash to sustain and propel the production of SUV's for years; while completely and utterly ignoring research and development of fuel efficient vehicles and new sustainable technologies, GM, Chrysler and Ford have created their own crisis, with the "straw" being the latest downturn.

The result, Chrysler, GM, and Ford are teetering on bankruptcy with their hand out to the government to help them get through the current slump.

Now, I understand that failure of any of these companies will have a huge impact on the economy. From large scale layoffs to the collapse of part makers to the closing of dealerships, it will be ugly.

But, I think we, and our members of Congress need to ask a fundamental question. Is it right to use taxpayer dollars to bail out companies that made poor management decisions over the past several years (maintaining a completely unsustainable business model with a vehicle portfolio that is 10 years behind consumer demand)?

For almost any other business, making a series of poor business decisions leading to it becoming uncompetitive would likely result is bankruptcy. No "do-overs," no handouts, its "game over."

Now the Big Three automakers are undoubtedly going to make the argument that this "bailout" is essentially a "bridge" loan to weather the current economic environment. My analysis is that their business models are essentially flawed and shoveling money into it is an exercise in futility.

A bailout, in my opinion, is not the answer. Most folks who pay their bills and work hard to make a living know that bad decisions, be it from a careless homebuyer all the way to a big corporation making foolish business decisions, should no longer be rewarded. Let the market work it out.

But, if the government does move forward with a bailout of the Big Three (GM, Chrysler and Ford), it should be all about conditions - aggressive development of fuel efficient car lines, investment in research and development to bring to market affordable, gasoline-free, clean automobiles and by mandate, transform the U.S. automakers into the most innovative, sustainable companies in the world. Something we can all be proud of once again.

Hold your breath and cross your fingers, either way its going to get interesting.....

Cheers!

Sean
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