PUBLIC MONEY MUST BE SPENT RESPONSIBLY

The automotive industry, specifically the three large North American companies, Ford, Chrysler and General Motors, is facing problems and looking for government support.
February 02, 2009
PUBLIC MONEY MUST BE SPENT RESPONSIBLY

The automotive industry, specifically the three large North American companies, Ford, Chrysler and General Motors, is facing problems and looking for government support.

American legislators rejected the first auto company aid package sent to Congress by the White House. Canadian government officials had discussion with the Canadian subsidiaries, but were waiting first to see what was going to happen in the US. Providing assistance to Canadian branches of American companies does not work if the parent company is going to be insolvent.

There is no serious argument about the need to help a troubled industry that employs so many. Were those three automakers to go under the estimated immediate job loss nationally is 323,100. There would be a further 258,900 jobs lost in the following five years.  With that many jobs at stake governments have a duty to provide assistance if possible. But that assistance can only be provided if the automakers have learned from their past mistakes and will not repeat them. There is no point in helping an organization that will be in trouble again in a few years.

One major concern is the retirement allowance provided by companies such as General Motors. Workers deserve to receive the pensions they have earned and paid into. It is quite another thing for a money-losing company to grant retiring workers a “gift” of cash of between $75,000 and $125,000 and a $35,000 vehicle. If the average retirement bonus is $100,000 plus vehicle and 1,000 workers were to retire each year, then that adds up to $135 million annually. A company that can give away that kind of money shouldn’t need to look to government for assistance.

I think automakers should end retirement bonus if they are receiving bridge financing or other support from struggling taxpayers. What do you think?