Are We Kidding?

All the recent news about a potential bailout of the automakers is driving me crazy. How can anyone think that just throwing cash at the automakers makes any sense? Fortunately this article gives me hope that we don't just hand them taxpayer cash. Any investor knows that there is zero sense in throwing good money after bad. The logic is the same here. Stroking a check and hoping that GM or Ford or Chrysler will pay us (yes... us... the taxpayers) is an exercise in complete stupidity. I have seen more assinine moves from the government before but this one would be a doosy. Why? Here is why:

1. NOTHING about a bailout will have changed about their ridiculous business model. Who the hell thinks that selling cars (or any widget) at a loss makes any sense? The little three automakers would lose less money if they shut their doors tomorrow and never made a car again. Draw up a business model like that and try to raise money for your business. See if you get any.

2. NOTHING about a bailout will accelerate the labor changes that need to be made. I am not pointing the finger here. Union leaders AND management are both responsible for this lunacy.

3. NOTHING about a bailout will make the little three more responsive to customers needs. The auto business is a long-lead business. It takes a very long time to develop new vehicles and it takes visionary leadership (of which, they have none) to anticipate the changes necessary for consumers.

4. NOTHING about a bailout will change the perception that American cars are crappy vehicles. In spite of recent statistics to the contrary, the PERCEPTION (which is all that matters) is that American vehicles suck.

The bottom line is that the American auto industry does not have a cash problem. The cash problem is a symptom of a much larger disease. A bailout would be like trying to treat AIDS with cough syrup.

So what is the solution? They can make the "too interconnected to fail" argument and there is probably a little bit of truth to that. But the bottom line is that bankruptcy exists for a reason. A Chapter 11 reorganization is just that, a chance to reorganize without creditors breathing down your neck. It is a chance to fix the auto industry. People will lose their jobs. That sucks. Maybe there should be a little government help for the workers. But not for the atuomakers. They are a lost cause. This was an easy long term short I had on for a long time. I took it off about a month ago. The trend was very easy to spot there. Until next time, stay low risk.