We Should Just Let GM and Ford Go Bankrupt and Close

by Hank Coleman

When is enough, enough?  How much more money can GM and Ford throw at their problems?  Eventually they will keep laying off workers until they have no one left on the assembly line.  How much of our tax money does the government want to keep throw at failing businesses?  The government needs to just let GM, Ford, and other failing businesses to die a slow death instead of constantly proping them up despite a broken business plan and unions driving them into the ground.

Yesterday, Ford and General Motors announced that they are so far in the red that they will need help from the US government if America wants them to stay in business next month.  Ford and General Motors burned through during over $15 billion in the last three months for the quarter that ended in September.  How do you spend $15 billion more than you make in a small fraction of a year?  General Motors spent $6.9 billion during the quarter, and Ford spent $7.7 billion in cash while posting a $3 billion loss for the quarter.  And, now the companies are begging the federal government for a piece of the $700 billion bailout package that was past last month in Congress.  But, they were not originally allocated any money from that plan.  The real kick in the teeth is that the big three automobile makers were given already a $25 billion loan this year by Uncle Sam.  I definitely do not think that the American taxpayers will be seeing any of that money back.

Whatever happened to survival of the fittest?  The government did not bailout DeLorean in the 1982 when it went bankrupt.  Why should the government help GM and Ford stay afloat?  My friend’s dad lost his job in a Carolina textile mill a few years back when the company began aggressively outsourcing the production of our cotton t-shirts and bed linens.  No one helped him find another job. 

The government should let failing companies fail.  I know that it will hurt a few people in the short term, but it will be good for the economy in the long term.  Whatever happened to making tough choices that benefit the greatest number?  Why is the government choosing to help only large multinational corporations and not small family owned businesses?

Once again, the real problem will be unintended consequences.  There are approximately two million jobs that are intertwined to the auto industry.  There are a lot of suppliers whose only customers are the big three car manufacturers.  I understand that losing two million jobs will be very hard on the economy and the workers, but maybe these are jobs that America should not have anymore.  Maybe American industrial workers should move on to a new industry.  There is a time when we should say that enough if enough.  There is a greater good to think of, and America can and should move on to industries where we still have a competitive advantage.

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{ 4 comments… read them below or add one }

Stacey Derbinshire November 11, 2008 at 9:00 am

A friend of mine just emailed me one of your articles from a while back. I read that one a few more. Really enjoy your blog. Thanks

Bruce McIntire November 11, 2008 at 9:02 am

Nice writing style. I look forward to reading more in the future.

Mike @ Oblivious Investor November 11, 2008 at 4:56 pm

Hi Hank.

I couldn’t possibly agree more. Creative destruction (aka survival of the fittest) is a huge part of what makes our capitalist economy so efficient.

Businesses exist to make money. When they don’t, they’re failing at their primary purpose. They’re counter-productive.

A failing business isn’t a charity.

James November 12, 2008 at 11:54 am

Hank,

Firstly I appreciate your honest opinion. Honestly, however I have to disagree with you. I don’t believe that GM or Ford should fail. They are very much wound into the fabric of this nation’s economy. You may see Ford and GM as a solely domestic company, however they make almost half of their sales overseas. The foreign direct investments of these companies are very important. I very much disagree with a substantial bailout saving the company (that I do agree with you). I believe that the problems lie in the Unions dragging down the Auto industry. Their pension plans and benefits outweigh what the company can afford. Another problem is the development of new products to keep pace with the adapting technology that foreign companies are bringing to the market.

My second point to make is that small businesses make up over 90% of business in the US. I agree that government should help them keep grow. What is so different about small as opposed to larger corporations are their ability to adapt to changing markets much easier. Large businesses are much slower to adapt because they have millions invested in long term investments.

Sorry about my rant, but I just feel that it is important for GM and Ford, which aren’t just National, but global icons stay afloat.

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