Car Bailout

As I watched and listened to the testimony of the car companies there were statements made that nobody seemed to want to talk about. The truth of the matter is the MOST important piece of information needed to make a rational decision was not discussed. The number of cars needed to be sold. The  conditions that need to be set in order for the bailout-loan to work as a loan. If it fails it becomes good  money thrown after bad for years and we end up nationalizing the auto makers to retain the manufacturing capability, (yes I think it is a national security issue).

The auto industry continues to use 13million cars sold yearly to be their planning number. This is the number needed for them to be profitable- after they get rid of 30BILLION dollars of bond debt and another 50BILLION in health benefits to the UAW. Oh and some kind of parity in UAW costs to the AMERICAN made Foreign cars.

THEY WILL NOT SEE 13 million car sales for more   years than I care to think about, they can forget seeing 17million for the rest of my lifetime. They had better change that number closer to 10million. The baby boomers are getting older and a little poorer. Gee, when you are retired you really do not need 2 cars. You mean I can save $400-$600 a month in car payments and $200-$400 in gas and insurance.  This can be the difference in living comfortably or even deciding I have $10,000 to take that trip-cruise or whatever the dream has been for 30 years. My wife's is an Alaskan Cruise and now she wants to stop in and have coffee with Sara. I digress.

I would like for all you that can remember the 80's. We had 16-18% interest rates and down to 12. Houses were selling like hotcakes to lumberjacks. The real estate company I worked for had actually sold a subdivision out prior to the sewer being installed. People waited for 6-10 months to take delivery. They were thrilled because the next subdivision was 10 grand more; oh, this was when 80-100k bought you a wonderful home in the Wash DC area.

 I found it particularly irritating to read in the paper how the real estate experts from the papers and others including NAR how they did not understand why sales were not recovering. Interest rates were pushed down 2-4% less than they had been the yr before.  Well the simple truth that they were unable to realize was the SUPPLY now EXCEEDED the DEMAND. Look at a graph that shows the population by birth. We were on the downside of the baby boomers buying there first homes. The demand would not be seen at those levels again within my lifetime.

Why am I talking about homes; there are people out there that may be able to equate the example to today.

1 the demand for cars in America is going to decline- will increase dramatically in India and China

2 The requirements for alternative fuels and electric cars will dramatically raise costs of cars

3 Government interventions will cause the carmakers to make cars people do not want—(remember it was the American public that wanted and bought SUV's and Trucks the car company did not force them. It was an increase in gas prices added to the loss of home values that made the desire to have better gas mileage. The public changed patterns in 3-4 months. It is very hard-NO IMPOSSIBLE for The big 3 to change overnight.  They have many good gas mileage cars but the demand is not there now and the public is not aware of the good gas mileage American fleet.

4 The economy will add to the lessening of demand for both the younger, but the demand from the baby boomers will be declining over the next ten years.

Come Mar you (the public) need to demand they look at this realistically. UAW needs to modify this year not 2011, they need to change there numbers (they included all the recent hires; going to be gone (seniority) therefore the wage rate comparison is false. The number of sales for the year HAS TO BE LOWER to be real.  We can leave them as is but then be prepared to give the automakers 300-450 billion dollars over the next 2-3 years and still end up with a bankrupt industry. The wages after that bankruptcy will be 10 dollars an hour. It continues to amaze me that the unions refuse to work together where they benefit when times are good but only maintain their salaries in harder time. I find it difficult to accept that the unions do not know how bad it is UNLESS union management is only out for themselves and blame everything on the companies so they can continue to be elected and make BIG bucks until they drive the company into the ground. Most of congress is incompetent or only thinking what is in it for me. They are easily capable of killing the goose that laid the golden egg. Senator Corker was on the right track.

JCS2