Monday, November 17, 2008

Auto Companies Loan Money To The Government

SEARCH BLOG: AUTOMOBILES

For decades, the automobile manufacturers have loaned billions of dollars out of their profits to Washington in order to produce a government that was not wasteful and would strengthen the interests of American business throughout the world.

Unfortunately, the government has failed miserably in that task, choosing to give that money to corrupt and questionable regimes, organizations, and unworkable causes while allowing the home market of American automobile manufacturers to be overrun by foreign manufacturers whose own home markets are protected against those American companies. This combination of continually requiring large loans from the American automobile manufacturers as their markets are fragmented, while simultaneously creating burdensome regulations for them, has left the American automobile manufacturers with serious deficits in operating capital.

Additionally, state governments also have required large annual loans based on the property value of these companies... whether these properties are actually making money for the companies or not. Instead of using these loans to improve the educational level of their residents and, thereby, provide a pool of knowledgeable, highly-skilled potential employees, these states have allowed these loans to be used by educational systems that barely graduate 2/3 of their students... and then more wasteful state welfare programs are required to support these dropouts... programs that require more loans from the American automobile manufacturers.

The problem was the failure of the American automobile manufacturers to set conditions on these loans. The primary condition should have been a preferred equity position in the government with priority given to any issues deemed important to those manufacturers. I'm sure the Democratic Party would have concluded that was a reasonable and fair condition.
Alas, the American automobile manufacturers did not demand this condition as part of the decades of loans to the federal and state governments. Consequently, now that these manufacturers have their own cash flow problems, they have little leverage in getting a portion of those loans repaid.
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