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
