Automaker Bailout: Ants and the Grasshopper?

Posted by David Hylton

When I was a kid, my parents used to tell me the story about the ants and the grasshopper… you know the one where the ants work all summer while the grasshopper is off doing his own thing, not worrying about his future?  Well anyway, winter sets in and old grasshopper comes to the ants and begs them to let him in. Of course the ants refuse because it had been “his” choice to avoid preparing for the future and he must accept responsibility for that decision.  I am reminded of this story daily as I pick up the newspaper or watch the news on TV. It seems that many corporations, supposedly led by brilliant people, spent the last few years conducting business activities that were not in the long-term best interest of their stockholders.  Economic winter has set in and now “grasshopper” executives are crawling to us “ant” taxpayers begging for our collective scraps of cash to help them make it through this harsh season.  Just like the grasshopper in the story, they, too, must face the consequences of their actions.

I am already plenty steamed about bailed-out financial companies using tax-payer money to bestow lavish salaries and bonuses on some of the very people responsible for helping to create this credit mess.  How can anyone expect to get a bonus, or even a full salary, for bankrupting their company?  If a business is willing to operate using public money then it should be held accountable under the same standards as those of public institutions.  Same goes for any of the Big Three automakers, even if they are asking only for low-interest loans.  Their current business models are unsustainable making them high credit risks and unworthy of such easy terms.  Besides, why should US citizens waste our money bailing out huge behemoths that have spent billions of dollars lobbying against legislation that would have made cars safer, more fuel efficient and cleaner?  Money could be better spent on funding “sunrise” industries that promise high growth, environmental preservation, more jobs and increasing tax revenues over the next 20-50 years.  Can the same be said about the future of the auto industry?  Automakers have had plenty of opportunities to change their business models between the 70’s oil crisis and the 90’s death of the electric car (see the movie “Who Killed the Electric Car?”).  But corporate leadership has always opted for the status quo:  building more expensive, bigger, faster more polluting vehicles and paying their unionized workers wages many times higher than their non-union counterparts in Asia and even Europe.  The auto executives, unless they were total idiots, had to know that these factors would make their businesses unsustainable and eventually lead to failure.  Maybe they were playing “Hot Potato” hoping not to be the last one getting their hands burned.  Well, I hate to tell them but the potato has come to a stop.  Americans, and others around the globe, have had enough of the stranglehold the car and oil industries have had on them.  Maybe it’s time to let the “sunset” US auto industry fade away.  Sure a lot of people will lose their $75/hour jobs, and subcontractors will lose parts contracts, but it was going to happen eventually anyway.   If the automakers were actually struggling to build something worthwhile, like electric or hybrid cars, then I’d feel more sympathetic and believe that a bailout plan could have merit.  But throwing tax-payer money at a bloated, inefficient system just so corporate executives don’t have to make uncomfortable decisions…?  Uh, this ant doesn’t think so.  I think it’s time for the grasshoppers to accept the consequences of their choice.  Bankruptcy may not be all that bad for the automakers; in fact, it may be just what they need to restructure more efficiently and get back to developing a business model that will be viable for the next 50 years.

The opinions expressed in this blog post are those of the author, David Hylton, and do not necessarily reflect those of BLTnetwork.com.

Tags: ants and grasshopper, automaker bailout, big three, economic crisis, electric car, hybrid