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Thoughts on the Auto Bailout

Dec 03, 2008

For many years the main automaking companies in America built cars with built-in defects, in order to sell more parts later. I think they still do this, although they cut back on this practice after people starting switching to Japanese-made cars, which lasted much longer.

I have bought quite a few Chrysler cars over the years, but after learning how their transmissions were built to last only 100,000 miles, I made sure I traded in those cars by that point. I had a new $1800 transmission put into my Chrysler some years ago when the odometer hit 110,000 miles, but the new transmission lasted just 8,000 miles. The mechanics told me that this was quite common, and it drives them crazy because Chrysler wouldn't guarantee the transmission once the car was driven out of the shop. (Of course not. Chrysler knows shoddy workmanship when they produce it.) So at that point, I just sold the car and took the loss.

The auto companies have also fought hard against any environmental improvements, as well as safety measures. People kept switching to foreign cars. I did, too. I bought a little car with a Mitsubishi engine in it, and after 276,000 miles, it was still getting over 30 miles a gallon, and I never had to overhaul the engine or change the transmission. The body wore out before the engine did. So don't tell me it can't be done.

So now Detroit wants a bailout. What do we do with such people?

It's almost as if the CEO's had bought stock in foreign auto companies and then worked hard to destroy their own companies in order to enhance the value of their stock in Toyota. No, I don't think that is what happened, but I have to confess that I don't like the American way of doing business. I have only the greatest respect for the auto workers themselves, but management is far too amoral to gain my sympathy.

There is another big problem that they have caused over the years. Many inventive people have come up with patents that would improve the mileage on autos to 100+ miles per gallon, and even up to 300 miles per gallon. These patents have been bought up for millions of dollars and then promptly buried, because the  auto executives have an incestuous relationship with the oil companies.

I suggest that the Congress NOT bail out the auto companies. I suggest instead that they BUY those buried patents and make them public domain to be used only by American companies in autos made here in America. The Big Three should be forced to disclose all of the patents that they currently own and then release those valuable patents that they have buried.

But if Congress were to bring up that point, you can bet on it that this idea would immediately be hushed, and a lot of Congressmen would find their Swiss bank accounts suddenly bulging with bailout money.

So perhaps a more practical solution would be to invest the $25 billion in American auto companies OTHER THAN THE BIG THREE. The "big three" have done horrendous things to small start-up companies in order to keep out the competition. Small companies cannot possibly compete without a lot of money. Is it not time to invest in those smaller companies, so that they can hire the unemployed auto workers in Detroit to build better cars for new companies that are not bloated by years of shady dealings? Why must we always bail out the big companies? Are not the little companies more worthy of our help?

Here are ten such companies:

http://www.popularmechanics.com/automotive/new_cars/4291426.html

If we step back and look at the problem, it comes down to a "too big to fail" mentality. In my view, any company that is too big to fail is simply TOO BIG. In other words, it has become a monopoly, perhaps not by legal definition, but certainly by a moral one. These companies buy up the competition, knowing that if they stay small, the government won't bail them out if they run into trouble. But if they gobble up competitors and become "too big to fail," then they can ride down easy street, knowing that the threat of unemployment itself will cause Congress to throw money at them.

Morally speaking, responsibility and authority should go in equal measures. If the taxpayers are to be made responsible for the auto companies' mistakes and bad decisions, then the taxpayers ought to own them. The same goes for banks. The people should not be held financially responsible for banks that have gotten into trouble by their own bad decisions.

The problem is that when these banks or auto companies become too big, then we are forced to bail them out because the little people are most hurt. The managers have already been given their millions and billions in salaries and commissions, and so it is hard to bring them into accountability after the fact. By moral rights, THEY are the first ones who ought to be forced to bail out their own companies. The problem is, much of their money has already been hidden away in foreign banks.

Two Suggestions:

1. The government should simply come to the realization that they should never allow a company to become "too big to fail." If it fits that definition, then it should be defined as a monopoly, and the company should be broken up into ten or more pieces, so that no single piece would ever get any bailout money.

2. Any bailout money should be used to build the smaller, newer companies who have struggled to compete with the Big Three, even though they have a better product. That way, their better product could be produced for less and be more marketable to the average American.


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Dr. Stephen Jones


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