Tuesday, August 18, 2009

Money well spent?

Now that we have thrown a few billion dollars at the automotive industry, what results have there been? Well so far, 1350 workers that were subject to lay offs have been recalled, according to today's news from Bloomberg. That means that we paid 2.2 million dollars for each of those recalled jobs. Yes it is impossible to know how much this program has helped to limit the layoffs in the first place, but I doubt it is as impressive as one would think. Looking at it from another angle, how many of the jobs that were farmed out to other countries such as India are being brought back? These are not directly GM or Ford jobs, but the companies that designed and built the tooling, parts, electronics and so on. In this vein, it would be very enlightening to see what % of the money spent by the auto makers in this country, stays in the US and how much is supporting a foreign economy.
Another question to marinate on is how many of the people taking advantage of this deal will default due to job losses, could not afford it to begin with etc?
Lastly what impact has this had on the automotive support industry? The neighborhood auto body shop, the local mechanic, the auto parts stores and the salvage industry. All of this money has been given to the public and used to persuade people to buy a new car when in a lot of cases, the cars were in good shape and just needed routine maintenance work. This has created something of a drought for the auto service industry. How many of these are now losing the battle to stay afloat due to the government tilting the tables on them. Where are those numbers and facts. The ripple effect might well be much worse than anyone knows. It is always a bad idea when an economy that is based on free trade has the government step in and pick and choose who is saved and who goes. We will always be weaker for it.

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