September 17, 2008
The September Fabricating Update e-newsletter discussed recent U.S. government bailouts of Fannie Mae and Freddie Mac. Since the newsletter went out, AIG also has been the beneficiary of a government-backed bailout. Lehman Brothers and Merrill Lynch weren't as lucky.
This newsletter also mentioned that General Motors, its domestic rivals, and suppliers are seeking government assistance. The Wall Street Journal reported that GM is lobbying Congress to approve low-cost loans to the industry. The company says it would use such a loan to fund the retooling of a Hamtramck, Mich., assembly plant to give it the capacity to build 60,000 Volts annually.
Newsletter readers have strong opinions about the bailouts, as evidenced by their feedback.
Only one newsletter respondent approved of government loans to struggling businesses, at least to GM. This reader, who works for a company that supplies the automotive, agricultural, and recreational vehicle markets, said, "Yes, GM is worth saving and big-time. If they pour say 100 million into GM, they get that back in income taxes and related jobs at dealerships and part suppliers, plus they can have GM pay it back over time, as Chrysler did. I think it's been proven that GM jobs are like 8:1 out in the country for people who are connected to these guys somehow. Lehman Bros had what—2,000 employees total? It"s not too hard to see where the money should go."
A project engineer who works for a laser equipment manufacturer doesn't agree. He said, "Corporations such as GM [that are in trouble] due to their own short sightedness and greed should not get bailed out with taxpayers' money. Nor should they get loans to produce a product such as the Volt, which is not by any stretch of the imagination affordable, economical, recyclable, profitable, or truly 'green.'
"Shifting the hydrocarbon burden from cars to our antiquated electric power grid is not going to accomplish anything at this time but put dividends into the pockets of GM shareholders, courtesy of the U.S. taxpayers. If the Volt was such a good idea, GM would have financed it themselves."
Who's to blame? A reader who works for a materials service center placed the blame for much corporate failure on management and unions. He also related a personal experience that helped form his viewpoint, particularly of GM. He said, "I do not agree with a government bailout of any company. The auto companies have been poorly managed for 60 years, and the auto workers union pressed for totally unreasonable benefits back in the late 1950s. If they are uncompetitive in the market place, they should be allowed to fail.
"We lived next to a salaried employee at a GM facility in the mid 1970s. [The family] had three daughters who were in braces. Why were they all in braces? At least in part because their dental insurance made that level of discretional work free! Is there any wonder that our costs of medical insurance and reasonable medical care are now out of control? Poor corporate management and strong unions in what looks like a business environment where the consumer will always have to pay whatever is charged for a product has developed into the current economic situation for our domestic automobile producers. Why should the rest of us taxpayers support their bloated salaries, wages, and fringe-benefit packages?
A reader whose company supplies the automotive, ATV, and motorcycle industries said, "Interesting facts [in the newsletter about] bailing out companies and corporations. While it makes sense to bail out a corporation for the sake of not having negative impact on economy, where is the accountability for these top levels CEOs and CFOs? They are still getting away with multimillion dollar bonuses and compensation packages for bringing these corporations down to earth and losing employees' jobs and retirements. When government bails out a corporation, parts of the deal must be that these people do not still get awarded with big checks, and they should be taken to court for compensations to employees."
An engineer who works for a metals supplier wrote, "I don't think the government should be in the business of bailing out people, many of whom made bad financial decisions. Our company has tried to make sound, long-term strategic decisions, so why should we help (through our taxes) other businesses that did not do their due diligence? And if we make bad decisions, then I fully expect others to hold us accountable. I understand that everybody falls on hard times at some point, even with the best of plans, but we all have to be accountable for ourselves. We can't fall into the trap of viewing the government as a 'sugar daddy' that will give us whatever we want, even if we deserve what we're getting. As has been pointed out many times before, the government is very bad at managing charity. Therefore, they should stay out of that arena, even if the companies wanting the charity have a lot on the line."
Other readers shared their thoughts about how the government should decide which companies receive assistance. Their ideas and other feedback will be included in an upcoming issue of Fabricating Update.
A final note. A reader who works for a company that produces spray technology equipment expressed an idea that anyone who's kept up with the national deficit must be thinking: The government, whether it knows it or not, doesn't have any money to bail out anybody. Good point, Dave.