The Absurdity of Federal Bailouts
December 5, 2005
Via the Washington Post from a week or so ago:
“We can compete with Toyota, but we can’t compete with Japan,” [Ford] said. In the wake of increasing competition, inept dinosaurs US automakers are asking for government bailouts; Ford is requesting goverment support in competing with foreign car manufacturers. I’m going to get to the bottom of this, let’s see exactly why this line of reasoning is seriously flawed.
It’s rather telling: Ford said his company is not looking for a bailout from the federal government. Now, I’m not exactly sure what else you could call such assistance, if not a “bailout,” am I to assume that Mr. Ford will reimburse the taxpayers once his company is back in the black? this is doubtful at best. “We’re just looking for our government to help us,” Ford said. Seems like Mr. Ford is more than happy with Globalization, as long as it is supplying his company with cheap labor and parts in Mexico, Canada, and wherever else it is Ford acquires its inputs, machinery and labour, let alone the computers that Ford organizations use to track, and ship and inventory, etc…
It seems that profit alone is no longer a sufficient motivator to increase their business, and fix their failed models. Now, Ford claims to need help handouts of your tax dollars to help invest in new technology, R&D that will help them face globalization, or as Mr Ford puts it, the “economic challenge of our time.” And the primary beneficiaries of such handouts will be the stockholders and stakeholders in Ford. Anyone with a rudimentary understanding of how publicy traded companies operate will instantly realize the following truth: Ford’s product line and business model are currently not performing well enough to entice investors who are willing to risk their money for a future return on their investments.
To the extent that people are legally obligated to pay taxes, most will agree that they are OK with paying them, provided they realize some sort of benefit (police protection, national defense, a system of law and justice, etc.) Millions of potential stakeholders are under the assumption that investing in Ford will result in either a negligible gain (and they could readily find an outperformer), or more likely, a loss on their investment. So… if people don’t want to invest in a company, it is the government’s prerogative (whether the Gov’t has the authority is another issue) to force them to do so? What? This is precisely why it is absurd for a publicly traded company to ask for your assistance in financing its future.
some semi-related thoughts can be found at Catallarchy.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
Leave a Comment
If you would like to make a comment, please fill out the form below.
