Thursday, December 11, 2008

Some rants about the auto bailout

Alright, let me take a break from the "How to be a responsible person" series and talk about the auto bailout. After reading the news about AIG paying $4 million to retain their "important" managers, I just can't help but doubt how the automakers will spend the taxpayer's money should they receive it (which is likely now).

So, let us ask ourselves, why do we want to bail out the failing automakers?

"If we don't save the automakers, more than a million jobs will be lost!"

To make that reason valid, we have to assume that the automakers will actually survive after we bail them out. If they continuing making cars that few people want, they'll still fail and thus trashing all those taxpayer's bailout money that can find great alternative use in society (don't tell me that we don't have other problems to fix).

Do you really think that will happen? You do? ARE YOU SURE? Or you're saying that will happen with a probability of 0.01?

If you have one minute, would you take a look at GM's income statement? It has been losing huge amounts of money since 2005. We are now at the end of 2008 and there's no pattern whatsoever that shows that it'll start profiting again in the near future.

In the history of business, how many companies can actually turn around from the brink of bankruptcy and prosper again? I didn't do much due diligence but, to the best of my knowledge, only Apple manged to do it in recent history, and that's because a genius like Steve Jobs came back to rescue it. I would bet that no more than 10% of companies manage to do that.

The thing is, if the CEOs of these automakers have been idiots for years, chances are that they'll continue to be idiots in the future; tell me, how many times have you seen a moron transforming into a genius? Let me answer for you: Zero. And, you know what, even a genius would only have a slim chance of saving a company that is so huge, hairy, dumb and bureaucratic from failure.

If the odds are so freaking bad, why on earth would you all democrats bet our hard-earned money on the automakers? When they fail few months from now after using the bailout money to give bonus to their executives (look at AIG), millions of jobs will be lost anyways. You're just delaying the problem, not fixing it.

So what will happen if these three automakers go bankrupt? Maybe other car manufacturers like Toyota will purchase their assets, although that'll be pretty limited since they may not have enough cash on hand. The auto workers will be out of job and they can either try to get a job from foreign automakers (which is difficult at these times) or they'll have to acquire new skills and go to other industries.

Yes, the U.S. will have no more auto industry if this happens. I agree that this is very painful, given that the U.S. was once the leader in the world.

However, this is how the world economy works. When a country isn't competent enough in an industry, another country that is better will take over and grab all the businesses. Sometimes even you're second best, it's one place too far away from the best. Take a look at how much rice and coffee Thailand and Brazil produce in the world's market and you'll know.

If the U.S. cannot succeed in the auto industry, accept it and let it be. Times have changed. The critical thing is that you don't let other countries take over what you're best at now, or the history of these automaker failures will repeat in another industry.

For example, U.S. still lead far ahead in the software and web industry. So, don't let other countries take over Microsoft and Google. Be the best in making OSs and search engines so that other countries continue to rely on your products/services and pay you. As long as you create values for other countries, your economy and currency will be okay.

If you still think that these automakers should be bailed out, please refute my arguments. For reals, if you can convince me rationally, I'll be much happier since you democrats will probably bail them out anyways. Darn it.


  1. I think you may like this article. It makes a similar point:

    "And when it is, our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet."

    While Detroit Slept
    by Thomas Friedman

  2. That's a great read! Yes I can envision that some day will be driving from place to place using such a electric network. It's clean and much more sustainable :)


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