VINCE CONTINENZA: Auto Bailout? No!: Bad Idea, Though I Once Depended on Big 3
By Vince Continenza
Special to The Pilot
As someone who formerly owned a restaurant in Kalamazoo, I know how dependent small businesses in Michigan are on the automobile industry. The news media are right in everything they tell us about all the jobs that would be lost if the Big Three should fail.
Still, having looked at the pros and cons of the current bailout request of $25 billion vs. Chapter 11 bankruptcy, I believe that a bailout now would be like throwing money away.
For 16 years, my restaurant was located on a nice inland lake across the street from a huge golf resort and minutes away from a summer equity theater. We were very busy in the summer season and very slow in the winter. We relied on our summer income to carry us through the winter, not unlike many other hospitality-related businesses that depended on the short summer tourist season in Michigan.
The depressed economy forced us to close our small business in 2005. Michigan, unfortunately, is still too dependent on the automobile industry.
There are thousands of small businesses in Michigan and the Midwest that sell parts or other products to the Big Three. These small companies have already been squeezed by the Big Three to lower their prices. Just like any other business, they need to be profitable to stay afloat. The ripple effect of General Motors, Ford or Chrysler going under would be disastrous to our entire economy.
But our automobile industry doesn't need money to fix its problem; it needs to change its way of doing business.
The unions in this country were needed in their day to protect American workers. We now live in a global economy, whether we like it or not. The labor unions in our country today are dinosaurs; they stifle the American work ethic and the ingenuity of our workers. Just take a good look at our auto industry. Workers are not rewarded based on performance; they are rewarded based on seniority.
Look at our education system, which ranks far behind many other countries. The Russians and Chinese are making huge strides in education. They are teaching their young people to be disciplined, with a strong work ethic and patriotism for their country. We will be no match for them in the future unless something is done now.
Let's revamp our education system by rewarding teachers based on performance and giving our children the necessary tools and knowledge needed to compete in our society and the ever-expanding global economy, rather than based on tenure.
Our automobile industry continues to lose market share.
My father always drove an Oldsmobile. He worked two jobs to support our family, and his lifelong dream was to own a Cadillac. His dream finally came true. I still remember the smile on his face when he pulled into our driveway with his prized possession! Like my father, I have driven GM-made vehicles since I was old enough to drive.
Don't Reward Failure
The bailout of the financial institutions, which have been given billions of dollars to increase lending, seems to have had little impact. Just recently we bailed out Citibank with $20 billion in loans and guaranteeing risky loans on their balance sheet totaling more than $300 billion -- and all this after the billions they just received.
Yes, our economy is in big trouble. But why are we rewarding all the businesses that let this happen? Banks are supposed to be conservative. Unfortunately, many Americans believed their lenders, who told them they could afford the mortgage on their home.
I do, however, like our government's approach to Citibank. By closely monitoring executives' salaries, restricting stock dividends, forcing them to refinance delinquent home mortgages and receiving ownership, we ensure that our taxpayer money will be well spent.
I am a firm believer that small business in our country is still the backbone of our economy. Is anyone bailing them out?
Small business is our major employer and provides millions of people with a start in the work force. It has been, and still is exciting for me, as a small-business owner, to watch employees grow and move on to jobs in the fields they have chosen. We as parents want and hope our children will have easier lives than we were given. It is our responsibility today to lay the foundation for that to happen.
Let Chapter 11 bankruptcy do the job it was designed to do. Our automobile industry needs to be modernized to compete in today's global economy. A leaner, restructured auto industry without the labor unions' strangleholds can pave the way for the industry to retake the leadership role in providing better-built and more fuel-efficient cars of the future.
Change of Mindset Needed
If we bail out the auto industry, where does the buck stop? A recent letter to the editor in The Pilot suggested giving each personal tax filer $650,000. Great idea! Give individuals the money with stipulations that they need to be fiscally responsible or no bailout. If my estimates are accurate, this would cost less than $700 billion.
Proponents of the auto bailout suggest that no one will buy a car from a bankrupt company. I disagree. Our new administration has acknowledged the importance that the American auto industry has for our economy. They will be much more open to guarantee loans to an industry under bankruptcy that will have a better chance to succeed, rather than spending taxpayers' hard-earned money on a bailout, just prolonging the inevitable demise of our country's once-great auto dynasty.
As with our president, the security of the CEO of large companies is important, and their time is valuable. Why couldn't the execs of GM, Ford and Chrysler have flown in one private jet to Washington, instead of three, especially since they all came from Detroit?
The Big Three got themselves into this mess. And until they change their mindset, it's not the taxpayers' problem to get them out of it. For now, let's say "no" to an auto bailout.
Vince Continenza lives in Southern Pines and is owner of the Ironwood Cafe.
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