An article on MSNBC asked some probing questions about the viability of an automaker bailout and the ramifications of an automaker bankruptcy. Greg Chaney, Manager of Chacon Autos, the Dallas-based owner of eight automotive dealerships adds his two cents:
“…if there is to be a bailout, I think there should certainly be strings attached, as the status quo is not working. They must present some sort of business plan to a board created by the government prior to any money being lent. We should limit what the money could be used for. It should not be used for increased dividends, executive bonuses, stock buy-backs, and only used to acquire another company if approved by the board. I think a heavy emphasis should be put on new alternate fuel vehicles or high fuel efficiency vehicles. And they should improve the quality of their fleet of passenger cars.”
Chaney has a good point; we need to set limits with these automakers facing bankruptcy before we handout any money. As far as limiting how any bailout money could be used, there’s nothing worse than giving a bailout to companies who insist on continuing their lavish lifestyles at the expense of the taxpayers. Any government bailout should come with deep cuts at the very top, i.e. executive salaries and company stock payouts. But there’s one point that needs to be clear regarding a bailout and the automakers’ ability to avoid bankruptcy…they need to make sure that the money is invested in technology that will make them competitive in the global market and create a business model that is sustainable.
Another point that Chaney made about the fall out of an automaker bankruptcy was very telling:
“We would most likely see much less of a demand for their vehicles. We would be wary of selling or buying any vehicles from that manufacturer, and we would most likely shift much of our inventory to the more stable companies and to the imports.”
In other words, dealerships would begin selling more foreign cars. The only problem with that is that those Americans working for US automakers in bankruptcy would eventually lose their jobs because of decreased sales and profits, further weakening the US economy. That’s something to think about.