From Kirkorian to Kevorkian

Its not like me to write two posts so closely together, but this week has been a doozy for whats left of the meaning of capitalism. I'm tempted to redefine it as a verb v. "the act of a company lining up to get a bailout from the government", but absent this total redefining of the word let me just rail against one particularly obnoxious case.

The Detroit auto industry which invented the term "cash burn rate", can't increase their cars' MPGs, but has succeeded in continually increasing its "cash burn rate". What exactly is a "cash burn rate"? Its the rate at which their business obliterates their cash hoard. And the verb "burn" is very appropriate because they're losing billions per month each!

I have a couple questions - if Ford and GM are losing billions per month each - where is this money going? If its operating costs, shouldn't this be going into the economy somewhere? Their burn rate is bigger than the fiscal stimulus package issued earlier this year! Absent any real explanation, I'll just put this picture in your head - guys shoveling bundles of hundred dollar bills into furnace - the top of which you see smoking in the Detroit sky line when driving through. I wonder how long it would take to literally burn 30 billion dollars through this method?

I steer my outrage away from the executives who have repeatedly made millions yearly while driving this industry into bankruptcy - that is a different rant altogether.

In any event, the auto industry is now headed into Washington to get a bailout to prevent the collapse of this venerable industry...again. My question is why should we be interested in investing in an industry that at its core describes its operating atmosphere with "cash burn rate"? Shouldn't we be looking to support industries described by terms like "cash pile-up rate"?

Well, unfortunately this industry has been suckled at the tit of the Government for so long that it has become a shadow welfare program for 1 in ten workers in America. Yep - its real strategic plan was to become too big to fail and threaten the consequences of its failure at the worst possible moment for our economy.

Here is what I say - lets see how much money they think they need and then instead of saving these extortionists, lets plough it into unemployment benefit extensions, worker retraining, and diversify out of this money pit once and for all. We're already on the hook for the pension which would go to the pension guarantee corp which is backed by the US Government. So don't threaten us with this - we'll pay for it either way. At least letting the industry die will stop this liability from getting even bigger in the future.

Slowly dismantle the industry and sell off what assets can be sold, rehab others to create CNG cars with Boone Pickens, but if I never see another Ford Taurus or Chevy Malibu again I'll be a happy person!

Every savy investor who thought this industry in its current state was a good investment has been proven hideously wrong. Kirk Kirkorian bailed out after Ford showed him what the meaning of "cash burn rate" is personally. Its time to introduce Jack Kevorkian to this industry.

If the number for this bailout is 50 billion, let me do some envelope math with this: around 1 million jobs would be lost - if we just turned off the cash burning furnace, we could give every one of these people $50,000 lump sum. We could NOT give the executives any more millions and maybe these people could use the money to pay down their mortgages and refinance - two birds with one stone! Add on the unemployment benefits they'd get this would be a deal anyone who has lost their job already this year would take!

When is my $50,000 check coming? Talk about fiscal stimulus...