My new friend, Charlie, posed a question that is gripping the nation right now – should the government bail out the US auto manufacturers? While this post has taken me a while to craft, it corresponds with the start of a lame duck Congressional session on this exact issue. I’m no expert on this subject, but have watching with great interest. It’s no secret that the motorsports industry has had a long standing partnership with the auto manufacturers. I have business associates, turned friends, who are employed by the “Big 3” and been involved with all of them. This issue came to the forefront for me a few months back when GM announced it would not renew its NASCAR track sponsorships. Even this weekend, GM’s announcements have even created a stir in the NASCAR garages. This Washington Post article details some of the issues we face – “Big three apply brakes to NASCAR Sponsorship.”

 

To get back to Charlie’s question, here is the quandary I struggle with – should the US taxpayer bear the burden to prop up businesses that can not sustain themselves? Regardless of the reason for why they are not profitable, when a small business does not make money the owner inevitable has to shut their doors. Even closer to home, if individuals bite off more than they can chew and fail to make a car payment, they can’t get the money to pay GMAC or any other lender from their congressman. To some extent, the “bailout” may cause even more bad decisions and management. 

 

On the other hand, like it or not, the government just propped up the financial industry after years of bad decisions, so why not the Big 3 now? The current proposal carves out $25 billion from the recent $700 billion passed and earmarks it to provide loans to the auto manufacturers. I also very much realize the impacts allowing any of these companies to go under would have on our national economy. Some sources estimate that the auto industry has an impact on 1 out of every 10 us jobs.  If the “bailout” is truly a loan from the federal government and will be repaid, then maybe they should look it – just like a small business loan. This article provides some interesting information about the current proposal.

 

Right now it does not appear that the support is there to get the bill passed. The main problem I perceive is proponents indicate that there are no requirements or measures in place to correct the problems these companies face. My mom always told me that “there is no reason to throw good money after bad.” So, my long winded answer is that I may support a limited proposal to loan money to these companies, only after they present a business plan and proposal (just as any business looking for a loan would do) which shows a clear path for how they will fix their business and repay the money, with interest, within a reasonable amount of time. If they can not do that, then they do not deserve to be “bailed out.”

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