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Volume XVII, Issue 9 - February 26 - March 4, 2009
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Driving to Debt in a Hummer

Who knows where this bumpy road leads?

What is good for General Motors is good for America

–Charles Wilson, GM chairman: 1955

I remember well first hearing the above words, as I recall the furor they created as the big automaker and the government became involved in a hassle over contracts. It was a brash statement, but at the time it had a bit of truth: GM employed the most workers, paid stock dividends to countless citizens, maintained retirement funds and such and was a Wall Street stalwart.

Today, it would be so much more appropriate to say What is bad for General Motors is bad for America. And you can toss in Chrysler, soon maybe Ford, all of whom desperately need something good for the good of America. And quickly.

Bailout is the buzzword of these times. We hear it every day, and methinks I have much company in trying to figure out whether bailing out failing businesses is good or bad policy. Providing billions of government dollars to prop up fizzling private enterprises makes me mighty scared. And mighty angry.

But like you, dear readers, no one has asked me what I think, so here I am stewing in my own juices with faint hopes that those who govern us and spend our money know what they’re doing. All I really know is that somewhere down the road, my kids and yours are taking on hundreds of billions of dollars in debt with as much likelihood of a bailout as the cash cow jumping over the moon.

The Pyramid Tumbled

What’s needed for recovery and to keep jobs and pay pensions is for people to start buying vehicles. But with the economy and jobs the way they are, who’s going to buy a new car unless they have to? With new car sales down deep in double digits, it appears that Uncle Sam (being us) must come to the rescue.

No one else wants to get their feet wet.

The pyramid tumbled, and what a tumble: Hundreds of thousands of jobs, pensions, retirement benefits and such on the line with income and cash reserves dropping as fast as auto sales. Not just the automakers are taking the hit. How about parts makers, dealerships, others who cater to the auto industry? How about you and me, who are obliged to pay a horrendous tab for unemployment, retraining and other benefits for the resulting jobless?

To us, you and me, the question of bailouts by government is damned if you do, damned if you don’t. Can government stand by and watch the tumble of the Big Three — who brought it on themselves? Yet can it afford to ante up many billions of dollars to save an industry with no guarantees of success?

Is There a Lesson Here?

I’m not much with economics. But I recall the 1950s in New England. Textile mills, the biggest employer of the time in New England, were putting on the squeeze for bailouts of a lesser degree. Cotton jobs were moving south, a few out of the country, and the mills wanted financial and tax initiatives to stay put in communities that depended on them. In most cases, Rhode Island and Massachusetts caved, but Vermont resisted.

Many of the mills departed Vermont. But they left behind many who wanted work. Other industries and business filled the vacuum, oft-times with higher wages. Soon thereafter, the mills in Massachusetts and Rhode Island moved away anyhow. By then, Vermont had gobbled up some of the best employers, and recovery didn’t come easy for those other states.

Could there be a lesson in this? Could Uncle Sam risk letting the domestic auto kings fold their tents if need be? Would foreign automakers take on the unemployed as more buyers switch to their vehicles?

If we keep on dumping cash into GM and Chrysler (possibly Ford) and they still don’t make it, you and I could end up owning debt and worthless stock in both of them while riding around in a Camry. The more I think of it all, the more confused I get. How about you?

Driving my Saturn Down the De Soto Path

Far from my biggest concern, yet irking, is the reality that soon the Saturn station wagon parked in the driveway up here in Northern Anne Arundel County is going to cost me a bundle in equity. The honchos at GM have announced the end of Saturn and the Hummer, in addition to cutting back appreciably on Pontiac.

Who wants a vehicle of a brand being discontinued? Where will the service and parts come from seeing that my dealer deals only in Saturns, and Saturn is going the way of the passenger pigeon?

More than 40 years ago, I bought one of the last De Sotos. I had no concerns because they were made by Chrysler, then a thriving member of the Big Three. I knew Chrysler could afford to and would stand behind all its vehicles.

That was then. This is now. With all of the Big Three deep in red ink and bankruptcy lurking, how will any vehicle’s value, service, parts and dependability be vouched for in the long run?

Enough said.


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