American Auto Industry Going Bankrupt

Should our governments give bailout handouts to the North American automobile industry? It looks like President-elect Obama is leaning in that direction. Canada is also considering aiding its auto industry.

But is such a handout in the best interest of the taxpayers handing it out?

Mercedes couldn’t turn Chrysler around so it sold it to investment house Cerberus Capital. Now GM wants to buy or merge with Chrysler and is looking for government handouts to help it do so. GM is losing a billion dollars a month, and it wants to buy another losing operation.

Does any of this make business sense? Well, it does for Cerberus, which is trying to get out of a bad investment. And it might if you are an executive for any of these companies -- or even a shareholder who has seen the value of these shares plummet. But does it make real business sense for GM or for the taxpayers that are eventually going to have to make up these billions. Certainly not.

A few months ago, on this program, we forecast the demise the American Automobile industry. Let’s not delay the inevitable.

The Big 3 auto makers have been making bad business decisions for decades. They have been losing money, market share and customer confidence even when the economy was good. They have failed to produce competitive products, and they have failed to comprehend their marketplace. They have mismanaged their business for decades while their executives take home millions.

The American auto industry is broken. If it could be fixed they would have done so during the economic boom years. Giving these guys money brings up the old maxim "Any fool can spend a dollar to make back 50 cents."