Solving the Real Problem
As we all painfully know, the media is filled with stories about whether the government should spend billions of dollars to bail the big three automakers out of their financial problems.
The problem for GM, Chrysler and soon Ford, is that they are running out of money and may be forced into bankruptcy. The problem for the U.S. economy and our government is that if we don't spend billions to bailout the automakers, millions of autoworkers, not to mention car dealers and auto parts suppliers, will lose their jobs. This will cause more unemployment, less tax revenue to our troubled states, more foreclosures, and the list goes on.
Unfortunately, the proposed bailout does not address the real problem!
This billion-dollar bailout solution does not solve the real problem The real problem is people are not buying cars If people were buying cars, the automakers would have the money they need to continue operating. Giving billions of dollars to the automakers will not dramatically increase car sales. They will still have to close plants and layoff millions of workers because their cars are not selling.
Why have car sales for the big three declines so dramatically? After all, other manufacturers (such as Toyota) have not asked for a bailout; they have been hiring and planning to open new plants.
For 2007 and the majority of 2008, the answer to poor automobile sales was high fuel costs and a lack of fuel-efficient vehicles to choose from. As the credit crisis hit and the word recession entered the news, declining fuel costs were not enough to bring buyers back to the big three. And for people who want a new car, getting a loan is now a major barrier for all automakers. Giving the big three money will not solve the credit crisis, it won't make loans easier to get, it won't give them economical, fuel-efficient cars to sell for quite some time, and it will not make people feel the economy has improved.
If the government does feel it is important to save the millions of jobs the auto industry represents, we should ask ourselves: What would it take to increase car sales?
One answer is for the government to provide a $5,000 to $10,000 subsidy, depending on the price of the car, to anyone wanting to buy a new car. This would cost less than the $25+ Billion rescue plan, stimulate car sales, keep autoworkers in their jobs, stop plants from closing, provide needed revenue to the manufacturers, increase confidence in lending money to the manufacturers, and keep the car dealers and parts suppliers employed. In addition, this would make car loans smaller and easier to obtain.
Another answer is to require banks receiving Federal bail out money to use a portion of that money to make loans for qualified buyers. We already know giving banks billions of dollars with no requirements will not ease the credit crisis.
These are just a few ideas. The key is to make sure we solve the real problem.
Daniel Burrus, one of the world's leading technology forecasters, business strategists, and author of six books
Copyright 2008 Author retains copyright. All Rights Reserved.