The Great Success?

One of the successes pointed to by government officials and often certain media is the US Government’s savior of the auto industry. Much is promoted about recent profits of GM and Chrysler and the fact that jobs were saved because taxpayers bailed them out.

I suspect they would have survived anyway if normal and customary bankruptcy laws were followed and reorganization would necessarily have taken place as the laws were intended.  Instead, government stepped in and circumvented the law to the benefit of certain interest groups to the detriment of others. For example: secured creditors were forced to take far less than would be normal while unsecured creditors received unprecedented standing that resulted in them receiving a much better deal than any of the secured creditors. Not supposed to happen, but in this day of political influence effecting every segment of our lives, it does happen.

The real reason these companies got into financial trouble have not been fully addressed and the likelihood that they will again be in trouble in the future remains uncertain.  To put simple, auto manufactures simply allowed their cost to get so high that the products they produce became too expensive for the consumer and sales began to suffer as a result.

While the above mentioned bankruptcy proceedings resulted in lower cost, fewer jobs, and creditors having to accept up to 70% loss on the money loaned to these companies, auto prices appear to be near the same for consumers. Did no one consider the consumer when restructuring took place. Not only did taxpayers pick up the tab for the bailouts, they are also expected to pay the same overpriced amounts for cars and trucks as they did before the crisis.

So where is the benefit for consumers? How is this a model for success when the root cause has not been addressed? Why is nearly every car dealer in the nation building new showrooms and how will that impact comsumer prices? How can the current system continue to function without more government stimulus. The answer is, it won’t.