Auto Bailout Blunders

United States automobile manufacturers are in big trouble. They are asking Congress and the American taxpayer to help bail them out financially. Here are five huge mistakes that General Motors, Ford and Chrysler will need to address and remedy before anyone lends them money in the future.

1. Zero Percent Financing.

Excessive and predatory lending practices are one thing, but giving away money for nothing is another. General Motors Acceptance Corporation may have chewed off one arm by watching the mortgage lenders self-destruct with excessive interest rates and balloon payments and run the opposite direction. But loaning money for six years or longer with absolutely no interest rate in order to recoup the money loaned is the dumbest thing a bank could do.

2. Cash Back Incentives.

Everyone loves cash in hand, but the auto industry must have gone crazy at the sight of it because they offered to return large chucks of it back to auto buyers. When you start seeing advertisements for refunds and rebates exceeding $6,000 you have to wonder how overpriced the original auto was in the first place. The automakers are in no position to give such large returns as incentives to anyone.

3. Inventory

There used to be a time when auto dealers had to clear their inventory at the end of each year or pay penalties. People would wait until the fall to purchase knowing the dealers would practically give these cars away at wholesale or dealer pricing in order to move them. Now we have imports by the thousands waiting at waterfront piers to be picked up and delivered. Storage and transport are only two of the costs associated with any future bailout plan. Any good business person would tell you that overindulgence of inventory is a disaster waiting to happen. The potential buyer does not need that vast of a selection at their local dealer. For that matter, who needs 50 dealers selling the same cars within 50 miles of where you live? The dealerships need to get a grip and consolidate.

4. Fuel Efficiency

The sad story is that the auto manufacturers are doing too little too late as far as fuel efficient vehicle production. Now with gasoline returning to reasonable prices at last due to the recession and folks clinging to whatever vehicle they currently own to make due, who is in the market for an expensive hybrid? Unfortunately the dealerships have been pushing those big Toyota Tundras and Chevrolet Silverados onto the public. Unless those same dealerships are prepared to make assumptions of the loans they made on them in order to pay top dollar for the buyers to do trade-ins, folks will not be trading.

5. Unions and Production and Crew

People are important and so are jobs. The Unions need to come to a compromising position with management and the workers will need to find alternative places to produce because we do not need more cars. It would help if some kind of moratorium were put on imports, if the factory jobs shipped overseas or down south were returned to the mainland (nothing against NAFTA mind you), and some of the highly skilled mechanics and bodyshop personnel opened their own businesses with governmental assistance since more and more people will be needing their services locally to maintain the cars they already bought.