Auto makers back to the public trough asking for more

Back in mid-December when the 1st auto-maker bailout was being considered, I thought it was a bad idea. Starting off with an anecdote about my wife’s work at a telecom company back when the WorldCom fiasco was in progress:

Which is what caused her to remark to me the one day that WorldCom, in spite of the beating they took, was going to come out of bankruptcy having shed most of their debts by simply walking away from them. Her company, in contrast, was still going to be carrying the debt load they incurred. How, she asked, was that fair business practice? WorldCom was free to compete with them without the crushing debt their business model had saddled them with. Her company was going to be at a financial disadvantage for having done nothing wrong and having not welched on a single debt. Why should WorldCom get to compete in the business with such an advantage when it was their practices that got them into the mess to begin with?

It was good point, and one I didn’t have an answer for. I still don’t, these years later, as I look at Detroit’s Big 3 getting handed tons of taxpayer cash on a White House platter. Unlike the financial industry situation, no one passed a law in Congress directing the car makers in Michigan to make this or that kind of vehicle. No one forced them to design particular cars and trucks. And no one forced the Unions who have made it their business to get companies to cough up unending payroll to people who aren’t working to put that set of shackles on those car companies, either. Everything that’s wrong with the Big 3 has been a combination of poor management by the companies and an attitude of entitlement by the employees and Unions.

How, exactly, does handing over billions of tax dollars fix any of that?

Here in print and elsewhere in person I voiced the opinion, shared by many, that giving tax dollars to these companies would simply permit them to continue their business practices as they were. It allowed them to limp along still clinging to the same strategies that got them where they are today and not fix anything that really mattered. In short, it simply enabled them to keep losing cash. The only difference being that it was our cash instead of theirs. They wouldn’t fix anything because someone else was subsidizing their busted model and they’d be back for more when they had burned through what we gave them.

The headline this week: “GM, Chrysler Ask for Billions More in Government Aid.”

General Motors (GM: 2.18, 0, 0%) and Chrysler petitioned the federal government for additional financial aid on Tuesday, saying they needed the extra money to survive and arguing that traditional bankruptcies would cost even more than the bridge loans.

GM submitted a proposal asking for up to $16.6 billion in additional funding, on top of the $13.4 billion it has already received from the government. That includes $4.6 billion in loans it would like to receive in March and April.

GM also is requesting a $7.5 billion line of credit that could be drawn if needed, and asked to defer repayment of a $4.5 billion credit line due in 2011.

Chrysler is looking for $5B to go with the $4B it already received.

Conclusion: the billions of dollars given to these money-losing companies has done nothing to fix the issues they faced. It wasn’t a public responsibility to guarantee these firms’ success to begin with, why should we now – after watching them waste a couple of months and billions of dollars – throw more money at them when they’re not saying they’re going to do anything different than they already have? The companies’ management teams aren’t promising to do anything more than make decisions they should have made months ago (do they close down underperforming model lines) and actually get around to closing plants and shutting down facilities that would have already been shut had it not been for tax dollars artificially propping them up. The Unions aren’t suggesting they’ll do anything differently at all. Call them on it and they’ll huffily point out that they’ve taken measures to halt the practice of paying people as if they’re showing up for work as normal when they retired years ago but is that really anything to be proud of? That such a practice existed at all should have been embarrassing enough when they decided to turn to the public trough for money. To claim some sort of moral prize for having ceased such activity is appalling.

Sorry, folks, no more. Anyone who thinks we’ll ever see a dime of repayment of that bailout “loan” is dreaming and handing more tax dollars over to people who have demonstrated a clear intent to keep doing what they’ve been doing is folly. We’re already trillions of dollars more in the hole in just the last 3 months. With the pork-fest Obama signed yesterday (and he’s now pushing for yet another $50B bailout of the home mortgage industry) we can’t afford to be putting money into companies with a losing business model, a losing production capability, losing product designs, and an inability to make the hard choices. It’s time we made it for them by sitting this one out. Bankruptcy laws exist for exactly this kind of situation. Let them use them.