Bailout of the Detroit Giants

If you have read my previous post you would see that I oppose bailouts. However this bailout is slightly different to me. This bailout is not 100% because of mismanagement or shady behavior, in many aspects this is because of the credit giants screw ups. If GM could get the credit they need they may be able to sell more cars resulting in more profit. Would that solve all their problems? Not exactly, they still would have faltered because of high gas prices, model lines that are spread too thin and the fact they sold the majority share in their own credit company a few years back.

GM's overseas divisions are also a joke, they have... Opel? Is that it. I guess if you count Hummer as a foreign brand because so many of them are used by our military to invade other countries then they have two. Clearly, they have screwed up time and time again when it came to world wide support.

Now onto Ford. Ford is in a much better spot. They own their own credit company, so no problems offering credit to qualified buyers. They have very strong overseas brands, also they have a lot of collateral they can sell and have sold. Collateral like shares of Mazda, Jaguar and Landrover. They have been selling these off and have amassed enough money to survive a year at the current rate they are blowing through it. This means that if they can improve sales slightly in the next year they can get back on their feet just in time to see the economy grow again. Hooray!

So the big question is: Do we give them 25 million of the 700 million that already being spent? I think that giving money to GM is just going to prolong the enevitable. They should stop making Buick, Pontiac and Dodge and make Chevy and GMC their only two brands. Reduce thier dealers to 1500 to match Toyota (currently GM has 7000 dealers!). This will make them stronger, only if they agree to downsize should they be given money. If they are determined to hemmorage as much money as they are they will fail with or without our help.

Ford is going to likley be able to survive and lending them money may be a safer bet, it may also speed up their recovery. So I am not against helping them get back on their feet. They have proven they can manage their business and it is more the economy that is hurting them.

I have deliberately left out Chrystler. I think they are irrelevant in the scheme of things.