Amercan Automakers Now Asking for Buckets...

So now the 'big 3' are asking for bailout money. They say that they need it to survive. I say this... make better vehicles. Now some may argue that American cars are good cars... but let me sum up my personal experience with the different vehicles I have owned since I was old enough to drive.

1. Chevy Sprint - American - nice small car, great gas mileage, it only had a 3-cylinder engine. It only lasted about 60,000 miles before it was in such bad shape that I could only sell it for $500. Personal Verdict - it cost me alot of money to keep it running and resale value was terrible. Oh did I mention that it was an automatic transmission and was stuck in 4th gear for the last 30,000 miles that I owned it? I had to go manually from low to 2nd, to drive just to get any type of giddy up on the highway.
2. Chrysler Lebaron Blacktop Convertible (1990) - I really liked this car despite it's issues. It had a V6 engine which was like all the power in the world compared to the Sprint. I bought it used when it had 75,000 miles on it. A month after I bought it, I had to spend $2000 on a new transmission. A week after I got it from the transmission company, the engine blew out costing me another $1500 worth of repair. A year after that, the 'new' transmission began slipping again requiring yet another $1000 repair. I owned that car for about 3 years total and put into it more money than I would have making payments on a new car. It was retired back in 2001 when I destroyed it in a car accident.
3. Toyota Celica Hatchback (1991) - this was probably my favorite car. I was hesitant at buying a used car with 160,000 miles on it, but I got a great deal on it. I am a Toyota fan for life because of this car. I ran it to a total of 260,000 miles with the original engine and transmission and only had one major repair - an ignition coil. After all that, I sold the car for $500 more than I paid for it.
4. Toyota Tacoma Prerunner (2003) - my current vehicle. I've crashed it twice and put a ton of miles on it. I bought this vehicle new and plan on having it run for me for a long time to come. After 2 accidents and 70,000 miles, it still books for about 50% of what I paid for it new. After my 2nd accident in the truck (an accident that happened at highway speed on black ice), my insurance adjuster approved repairs without even looking at it while making the statment, 'it takes an awful lot to total a Tacoma, they're just too tough to break'.

I will never go back to a vehicle made by a large American manufacturer. When they argue that it costs more to make an American car because they don't have cheap labor, it just isn't true; Toyota vehicles are made in America, by Americans, who make American money and benefits. In fact, I have a friend who left the assembly line at GM years ago just to go work at Toyota because they paid him more money and offered better benefits.

The American automakers don't need more money. They need better vehicles and an open mind to new ideas. If it was your money, would you choose to invest in a company that has a business model that's designed to lose money on every product they sell? Oh wait... it is your money... our money... it looks as if we probably will be paying for cars made by the 'big 3' whether we drive them or not, whether we like it or not.

Get Your Buckets Ready...

This blog was originally posted about a month ago which I wrote regarding current economic woes...

With all that's going on in the news today, I decided to jump on the bandwagon to talk about the biggest event happening at this moment: The proposed 'bail out' of the financial industry. Here are my thoughts…

Two reasons why it's a terrible, TERRIBLE idea:

First – it will cause an inflationary spike. What happens when the government decides to put $700 Billion into a bail out plan? Well for starters, it adds $700 billion into the US currency circulation which in turn, will devalue the money that is already in existence – ALL of it; all the money you save, earn, or spend will buy less than it does now. You will immediately take a pay cut; the number of dollars you bring home will be the same, but they will purchase less. This is extremely important for people to understand because it is the fundamental concept behind a currency system that is based on government promise. Our currency used to be based on gold, but that was changed in 1970 so the government would have the ability to create money as they saw fit. Being able to create money gives the government the ability to invisibly move wealth from the people back into the hands of the government without creating additional taxes. This bail out plan would take $700 billion of value that the American people currently hold, and move it into the hands of the government to redistribute back to the largest and most profitable companies of our time. Does that sound fair?

Second – a bail out plan sets the stage for government favoritism for certain businesses. One of the risks of business is that one day, you might go out of business. 80% of businesses in this country fail in the first 5 years. Out of the 20% who survive only 80% of them make it an additional 5 years. Going out of business is part of business. Our country was founded on free enterprise. Giving or loaning money to a big company just so it can remain a big company is un-American at its very core. Why is it, that CitiGroup got a multi-billion dollar bail out 6 months ago because it was in 'such grave trouble' and now only yesterday it was in good enough shape to purchase Wachovia? The answer is that CitiGroup was never in as bad trouble as we thought, but they were able to get the favoritism of the US government to give them an unfair advantage over other financial service companies. Again, this is about as un-American as it gets.

Large companies should not be immune to failure. The government never stepped in to help my dad's small photo business pay for a machine that he got a bad loan for – he was on his own to figure it out and fight through the courts.

If large companies never failed, then when would newer and more innovative companies be able to rise to the top? What's the reward for a company that does everything the RIGHT way?

I think the government should focus on fixing the true problems behind the nation's current economic woes:

• Large corporations give huge sums of money to congressmen and other lawmaking officials in exchange for preferential treatment, tax breaks, and laws that specifically give them advantage over their competitors. It keeps the little guy down and stifles invention, innovation, and the general propagation of new ideas. It should be stopped completely.
• Include financial education classes mandatory for school system accreditation. American citizens get no financial education in the K-12 mandatory schooling we are all supposed to have. Teaching young people how loans, credit cards, saving, and investing work would give them a fighting chance when it comes time to make decisions. They would no longer have to just assume that the banker, loan officer, or car salesman is giving them the right information.
• Add taxes to companies who utilize overseas labor to equalize the cost-effectiveness of outsourcing. Outsourcing lowers the wages of jobs here in America. Low wages are the main driving force behind much of our economic problems. 45 years ago, the average middle-class American family owned 1 house, 1 car, 1 TV (the highest form of consumer technology at the time), paid for childrens' college, saved for retirement, and took yearly vacations – and it was all done on a single income with no credit cards, no car loans, and no student loans. Today, the average middle-class American family relies on 2 fulltime jobs, 1 part-time job and owns 1 additional car. They also have loans on both cars, a 30 year mortgage (45 years ago it was a 10 or 15 year mortgage), student loans, and about $10,000 of credit card debt.

So that's my deal for now. Maybe if the cost of living in the past 45 years had gone up by the same 1000% that incomes had, we'd be fine. But the solid truth is that it has gone up by about 10 times the rate of our incomes. If our incomes kept up with the cost of living, we as a nation, would not rely on credit cards, car loans, student loans, or indentured servant-ish 30 and 40 year mortgages on our homes.