The current financial bailouts to big corporations in the United States have been received with mixed reactions. While proponents argue that it is the responsibility of a government to ensure that the country achieves its millennium goals by creating an enabling economic environment for business growth and prosperity, many financial and business experts view it as simply a mechanism of perpetrating a mishap in the industry. The current global economic and financial crisis should never be used by companies as a scapegoat to justify their poor financial performance. (Morgan, 2008)
The latest bailout in the arena is the episode revolving around the three giant US automobile firms. Over the past few years, the United States has witnessed many of its corporations sink into liquidation, the result being large financial bailouts. This shows that the government could be playing its role in the right way by ensuring that these companies are restored to their financial positions thereby leveraging the people who would have lost jobs in the short term. (IRISHTIMES.COM, 2008) It should be noted that the government’s bailout response to many of these companies could just be adding to an injury.
To start with, all financial systems are so important to the economy and therefore should be accorded equal treatment. It is very difficult to tell whether giving a financial bailout is an assurance that the money will be used in the right way unless tight procedures and systems are put in place. (Morgan, 2008)
Many corporations in the world fail not only because of the financial crisis but because of poor management practices. What about the Enron episode? It can be accepted that there are those who recognize the fact that the current economic world is competitive and therefore undertake to face their rival firms in the global market by producing quality cars which create more fuel efficiency, only these ones can be bailed out. Those that still operate on the premise of inflexible structures, old and inefficient management structures should actually face the music. (Charles, 2009)
Secondly, the big three have become inefficient in the manner in which they handle health costs associated with retirees. They incur heavy expenses taking care of their retirees and fail to carry out enough research and development activities. In today’s modern world visionary leadership is supported by aggressive research and development policies. This is the only way that the government can be able to create a more sustainable economic environment.
The automobile industry is dynamic and should borrow a lot from the new advancement in new plants and technology. To support this, governments should relax their muscle in bailing out these firms so that they remain more development aggressive and innovative. (Corcoran, 2008)
The big three have not done enough marketing. For example, the cost of living in Germany is extremely high yet they still produce quality cars that are sold at the same price locally and internationally making huge profits. US consists of Ford and GM with an international reputation. If the big three can embark on thorough and aggressive domestic and global marketing policies, they can surpass their annual sales budgets by a bigger percentage. This implies that they can achieve reasonable future profitability ratios which can give an assurance for future financial and economic prosperity hence eliminating the possibility of any further government’s cash bailout. (Guerrera, 2009)
Firms should never hide behind the current economic and financial crisis to relax their economic activities and wait for government assistance. Highly ranked organizations are top-performing because they put in adequate management tools supported by strategic planning and decision-making processes. Good marketing research coupled with maximum use of modern technology is the basis for big performers. It is therefore important that before the government undertakes to bail out the big three automobile firms or not, their core business activities should first come under thorough auditing practice.
List of references
Charles. Bail out: the Next Step. 2009.
Corcoran, M. Instant Massive Cash Flow The Ultimate Cash Bailout for 2009 by “Quentin Whidbee. 2008.
Guerrera, F. US banks scramble to repay bail-out cash. New York and Krishna Guha in Washington Morgan. Why we should not bail out Detroit. 2008. Web.
IRISHTIMES. Cash bailout for US auto industry is expanded. 2008. Web.