Wednesday, November 19, 2008

Sell More Cars

If you've never been, you might one day consider visiting The Rouge, a Ford factory right outside Detroit. We took the tour a couple years ago and found it to be pretty interesting.

One thing that struck me coming away from it was the museum's portrayal of the labor movement. Either the curators know that their audience is pro-labor and so cast a positive spin on the unions or they feel a need to be politically correct and make up for Ford's bashing the unions through it's history. Either way, the big push is to portray the company-union relationship now as a "Partnership". It's no longer adversarial but instead cooperative.

Which brings me to the spot in which the Big Three, the Congress, and American taxpayers now find themselves. Ought we bail out Big Auto?

The problem is that because company and union are now a Partnership, the Big Three morphed from being car companies into being jobs programs. The Partnership's goal is not to sell more cars and trucks, but to stay alive to be paid another day. Management wants to keep their jobs and the union wants to protect their jobs. The poor share holders, I'm sure, tho, would prefer that the Partnership makes a profit by selling more cars.

In their effort to stay alive, representatives of the Partnership showed up on Capitol Hill yesterday to beg Congress to allow American tax payers to become share holders.

According to the reporter on Squawk Box this morning, Ford is presently losing $400 for every car it sells. I'm sorry, but investing in a company that's doing that does not appeal to me. I'm assuming that if they sold more Fords they would be making a profit. But in the mean time, why would anybody buy stock in that company? Why? It makes no sense.

The only answer is to save the jobs. Remember my assertion that the Big Three are nothing more than jobs programs disguised as car companies. Maybe the economy is so bad that we need in the short run to protect those jobs, I don't know.

But I guarantee you this: in the long run, a car company cannot survive when it's losing $400 per unit. A government program, of course, can go on losing $400 per unit as long as the taxpayers allow it and the Treasury keeps printing increasing worthless dollars.

The question taxpayers and Congress members need to be asking is, honestly, do we want to keep this jobs program going? Do we want the Partnership to survive? Or do we want them to convert back to for-profit car companies? My guess is that giving the Big Three Partnership $25 bil. more will not cause them to sell more cars.

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