Help Mommy, I made a mistake
Posted by Tom Nowakowski on November 13th, 2008
With all the talk in the marketplace of all these bailouts, you have to ask yourself is it really a good thing? The financial bailout that happened less than a month ago is now pouring over into a bailout of the automotive industry. Does this make sense for us?
A good friend of mine told me the other day that if he could, he would go ahead and buy millions of dollars of stock in GM. A year ago I would have said the same thing, but then I learned how to read financial statements. Just because something is cheap, doesn’t mean it’s undervalued. Go to the grocery store and you’ll know what I mean. You see that bread for 10 cents? Well, you better hope you can eat it all within a few hours before it goes rotten.
The problem here is that the lawmakers aren’t looking at the automotive industry with unbiased eyes. Instead they see GM as a pinnacle of US manufacturing and they don’t want to see that go away. Last time I checked you’re not supposed to value a company based on emotions but instead on the value that it brings to its shareholders. Here we have a company that has been dragged down by poor management and terrible inefficiencies. Is this a company that I want to reflect as a cornerstone of American ingenuity? Hell no, I prefer to put that title on companies like Google and Microsoft.
How is it that the US car makers have been able to continue on this downward spiral and just as they hit bottom they get a bailout? It makes absolutely no sense! Granted, people will say that we can’t let this happen because more jobs will be lost in Michigan. Well, I have a feeling that if GM went under some other automotive company (that actually makes money) might step in and save some of those jobs. Sure it won’t be all of them, but it’s time that the Michigan economy starts doing things right! Why keep pouring money into a business model that is flawed, it’s a proven fact!
In either case, I firmly believe that companies should be held responsible for their own financial woes. I’ve worked at GM before; I have seen the ridiculous inefficiencies that they allow to happen it’s quite frightening! If they get a bailout today, we will see this same thing happen again in 15 years, count on it!
2 Responses to “Help Mommy, I made a mistake”
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This could also be the opportunity the Big 3 need to force the sweeping changes necessary for their business model. If the auto companies are allowed some part of the bailout plan (or a plan all their own), there would be stipulations attached, much as there are for the financial industry bailout. This may even be the chance for the auto companies to loosen the stranglehold the UAW has on them (think: American Axle). Besides, bankruptcy for GM would not just hurt GM employees, but several suppliers as well. A good chunk of these suppliers appreciate the need for diversity and cater to several different automotive companies, but so many others have a majority of their R&D and tooling dedicated to a single vendor. In either case, too many suppliers would feel that pinch. I guess my ultimate questions are: if GM gets liquidated, who buys what they have to sell? And more importantly, what do they do with it?
Good points Walt! We could go on and on about the UAW and how it’s affected GM over the years but that would be a new topic altogether. I definitely don’t want anyone to lose their job but sometimes you need a kick in the ass to start you down the correct path. It makes me sick to know that Ford and GM’s stock is so low, yet their stocks are hovering around $40. That tells you something about their corporate structure and ability to ride a recession. I will be posting about Ford next because if there’s any company that I think is moving in the right direction it’s them. They have quality higher than Toyota and have a great product line. The Fusion, Edge, and Focus are really a great line that will help with new customer demands. They just need a newer Marketing direction to get that word out to everyone. More on that later!