A Big Three Bail Out? Don’t You Have to Make Money to Stay in Business?
Congress announced this week they are inching closer to making a deal with the Ford, GM and Chrysler companies to provide financial aid to keep them afloat until early 2009. I bet if they made good cars and consistently kept their expenses below their earnings, they might actually be able to survive on their own. Whatever happened to good old-fashioned capitalism and having to make money to stay in business? Did Ford, GM, and Chrysler just now figure out that they haven’t been turning a profit in years?
Here are some numbers I pulled directly from Google finance which show the stark contrast between failing companies and healthy ones. Even though the numbers are in Japanese Yen, Dollars and Indian Rupees, the important factor is the obvious negative net income vs. positive net income. (Numbers are in Millions)
| Net Income | 2007 | 2006 | 2005 | 2004 |
| Ford | -2,723 | -12,613 | 1,440 | 3,038 |
| GM | -38,732 | -1,978 | -10,621 | 2,701 |
| Nissan (JPY) | 482,261 | 460,796 | 518,050 | 512,281 |
| Honda (JPY) | 600,039 | 592,322 | 597,033 | 486,197 |
| Toyota (JPY) | 1,717,879 | 1,644,032 | 1,372,180 | 1,171,260 |
| Tata Motors Limited (INR) | 14,205.90 | 18,111.60 | 15,010.60 | 13,256.20 |
And this doesn’t even show the 2008 numbers, which undoubtably will be even worse. Unfortunately jobs will be lost, but why reward a business that is failing? Why waist money on a business that has operated at a consistent loss for 3-4 years.
Their claim is that too many jobs would be lost, and the after shock of that would be “catastrophic” for the US economy. But what about this:
- Honda reports it’s plant in Anna Ohio is doing fine, it even underwent a $75,000, 135,000 square foot expansion.
- Toyota opened its second R&D campus in October 2008, in York Township, Michigan.
- BMW has over 200 suppliers in North America. Toyota has roughly 500 major suppliers in North America.
The U.S. is really good at a lot of stuff: technology, innovation, entertainment, and design to name a few – but sorry, currently they just can’t make cars. Yes, I did say currently. Who knows what a stiff kick in the butt (going out of business and massive job loss) might do?
Here’s some simple yet hard advise: if you want to stay in business you have to make money, otherwise you have no business being in business. Take it from someone who knows a little about making money:
“Sales minus costs equals profit. Is there more?” – Bill Gates
Big 3 CEO’s Take Private Jets to Beg for Bailout
Some disturbing happenings in Washington today as the CEO’s of GM, Ford and Chrysler made their appearances after flying to the capital in their posh luxury private jets to beg for $25 billion of our taxpayer money to avoid going into bankruptcy.
According to ABCNews, GM’s Wagoner’s flight cost an estimated $20,000 roundtrip from Detroit to DC. When asked during the testimony by a Congressman whether they considered downgrading to first class, or would be willing to sell their jets, the three of them just sat motionless.
“This is a slap in the face of taxpayers,” said Tom Schatz, President of Citizens Against Government Waste. “To come to Washington on a corporate jet, and asking for a hand out is outrageous.”
Looking at the video clip, I think a bigger slap is Ford’s CEO Mulally getting off the plane and into a Lexus LS!
Ford CEO Mulally arrives at Dulles and gets into a Lexus!
Personally, I think the government should let the three try to survive on their own. If they had built good quality cars that Americans want to buy, and not overpromised by negotiating absurd deals with the unions (who’d rather see the companies go bankrupt than give any concessions – another story in itself), then they might not be in as deep a hole as they are now. Bankruptcy may be a good thing – giving them a chance to get out of some these legacy costs. Heck, it worked for the airline industry, it can work for auto as well.
What do you think about the bailout for the auto industry?