Thursday, December 4, 2008

Are We Just Stupid?

Detroit's economic affairs are being described in the media as kind of a ho hum affair. The automakers ask for financial help and then are ridiculed for flying to Washington in their private jets. The history of the automakers is not good, however they are not solely to blame for their predicament. Unions have hounded, badgered and out right held up the auto industry until the benefit package given to autoworkers is ridiculous in its scope. The American public takes no pity on the industry, and rightly so, that is the way of a market economy. Detroit fell into a trap after WWII when they allowed their quality to degrade to a point where they became easy prey to superior automobiles that appealed to the consumer's idea of spiffy.

Then a statement caught my eye in an article on CNN today. Here are the comments, I've cut them and pasted them as they appeared in the article. "If the GM board decided there was help on the way in early January, I'm sure they'd make an effort to preserve cash and get to that point," said Bob Schulz, Standard & Poor's senior auto credit analyst.Are we just goddamn stupid? What the hell kind of a statement is that from an S&P analyst nonetheless. I guess if GM feels there is no bailout they'll just spend their money and fall into the pit of financial doom waiting for us, the taxpayers, to bail them out.

First of all the guy making the statement, God, what can you say about him. I'd sure bet my money on his analysis. Secondly, everything the auto industry is doing right now is trying to blackmail Congress into a sweet deal. If they are hemorrhaging cash then they should stop the bleeding. How many cars produced this month are needed to be sold this month, probably zero. So, shut the operation down. There are contract provisions that extended supplemental pay to laid off employees, but at least stop the material consumption in making the product. You also won't litter the landscape with inventory that has marginal value. Yes, there are costs to shutting down. You typically don't save money, but you don't spend a bunch right now and at least live to fight another day when some rational thought can be put to what kind of bail out package might be best.

I still can't believe the statement made by Bob Schultz, what a fucking idiot.

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