f you think the “Bridge to Nowhere” would have been a waste of money, just wait until you read more about this potential disaster tugging at your wallet. Understanding the problem will make it obvious that the solutions are clear, and none of them involve a bailout by the US Government.
The bailout of the “Big 3”, GM, Ford and Chrysler, if approved, will amount to between 25 and 50 billion dollars, but that may be just a down payment. The men at the top admit it may not be enough; they are somewhat right, it won’t even be close to enough. We have a solution proposed at the end of this article, but first, let’s explain the plight of the “Big 3”.
Since the late 1990s, American car companies’ stocks have been in sharp decline, and GM’s market value is now only 2.5 billion dollars, but GM alone will burn through their entire valuation in less than a month. Ford lost an astounding 12.5 billion dollars last year alone, and the economy was much better than it is today. No one in their right mind will give them any credit, other than those of us tax payers that may be forced to do so. They have massive debt and pension obligations and are bleeding cash while car sales on the whole are in a sharp decline.
As a comparative example, here is a chart of four stocks, Toyota, Honda Motor Company, Ford and GM. It doesn’t take a rocket scientist to see GM & Ford have been failing dramatically since around 1999-2000 and never recovered while their competitors rapidly gained market share and value. Recently, they have all corrected, but what is a downturn for the leaders is bankruptcy for the losers. Do you honestly think a bailout is going to reverse these stock prices while the companies are losing billions of dollars a month?
How dire is this and how have the companies responded? This article sums it up quite well.
The market is telling you something. The stocks of these companies have collapsed because they are no longer viable businesses.
Of course, if you throw billions at the companies, they may survive, but using that money to build new industry and new jobs that can thrive in America is vastly better than sinking it into dying dinosaurs.
While the auto company executives have a vested interest in the survival of their companies and say that the US economy will collapse without them, the problem has been clearly demonstrated by their collapsing stock prices for nearly 10 years!
Over that time, how have they managed the problems? Most recently, after losing billions, they are cutting costs. That is understandable, but they are cutting their costs by first shutting down plants in North America and laying off US and Canadian workers.
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