Corporate Bailout

So with the recent bailout of the financial industry, it seems that anyone who thinks they deserve a free handout because of poor market conditions wants to cry "poor" on Capitol Hill. I do not profess myself to be a financial genius or a great economist, but apparently aiding the financial industry, who made so many bad loans to people they knew they shouldn't have made loans to, was a necessity. I disagree, because they knew that people were getting into these loans with lower incomes and high debt, but what do I know, I just live here.

Fine. That DOESN'T give every corporate organization the right to come before Congress and ask for more money because the CEO's make millions per year, and fly corporate jets that cost 6 times what it would cost to fly commercially. I am so disgusted with Ford, GM, and Chrysler for having the nerve to come before our nations government and whine about how their company profits are down because of market conditions and they can't run the company without a taxpayer bailout. It's a load of hooey.

Let me tell you why profits declined for the automakers:

1. Reputation. Foreign vehicles have better reputations for durability, safety, customer service, maintenance and warranty offerings. That's not to say domestic vehicles are bad, they just struggle to compete with overseas automakers.
2. Gas prices. The SUV boom is over. It will not see growth the same way it did a few years ago when everyone had to have one, mostly because of their fuel efficiency. With gas prices that reached astronomical heights, more people were opting for more fuel efficient vehicles to save money at the pump. With trade-ins of SUV's on top of the surplus of current inventory, the value of the SUV plummeted and even when sold, did not yield much of a profit if it yielded one at all. The automakers could not have forseen other economic turmoil, but they also over-produced their large vehicles, particularly SUV's and trucks.
3. Vehicle cost. Because it takes so much to produce vehicles, and more for larger vehicles, they come with a high price tag. The unfortunate reality here is that because the automakers made the same faulty lending that the mortgage companies did, they shot themselves in the foot. They made loans to people who couldn't afford to pay them, but they'd loan the money so they could get the sale.... What a bad idea.
4. Overpaying executives. Yes, you heard me. I don't really think ANY executive who makes MILLIONS per year, has the right to come before Congress and ask for more money to run their business. Seriously, where does all that money go? They are the business leaders, it is their job to lead by example and if leading by example means taking a pay cut and shaving some perks, then that's what needs to happen. Frankly, if they are any kind of business intelligent, they wouldn't have let their companies fall into this position in the first place.

Essentially, anyone in the lending industry is at fault for our current economic crisis. People who make $20K are driving $50K cars, or at least they were. The same goes for houses. Mortgage companies would approve couples for $200K homes when they made $50K or less. Of course, the people who fell for these bad loans are also to blame. If you don't know where your money is going and you always seem to be broke, it's probably time to sit down and budget. KNOW WHERE YOUR MONEY GOES!

Even with the proposal of a bailout, it is not going to change the financial industry. I have recently become a big Dave Ramsey fan (ya know, the "Live Debt Free" guy) and he makes the point that financial management is 20% intellect and 80% behavior. While he tends to focus more on personal finance, the same principle can be applied to the financial, mortgage, and auto industries and to pretty much any financial situation.

If the government (aka taxpayers) bailout any industries, it is only treating the symptom of the real problem - poor management. If these companies are going to turn themselves around and become profitable again, they are going to seriously examine their expenditures. Maybe the CEO shouldn't get 26 million a year, especially if sales dwindle. That's rewarding poor leadership. Last time I checked, good leadership is what should be rewarded and bad leadership punished.

Maybe some of the executive perks should be removed. Who really NEEDS to fly everywhere on a private jet. Are they really so arrogant to think that they are that much better than the average citizen? They are in for a rude awakening and if the Board of Directors for these companies have ANY sense, they'll restructure executive pay, as well as the overall business model for the company, maybe even elect new members and top executives. If doing so requires filing Chapter 11, then so be it.

It's not OUR fault that THEY can't manage finances and plan appropriately. The auto makers need to step up and be held responsible here, not the hardworking taxpayer.