By Kevin Gordon
In recent news coverage, there has been extensive discussion that bailing out GM, Chrysler, and Ford will have similar results to what happened to British Leyland in the ‘70s and ‘80s. For those not familiar with the story, in this time period, almost $17 billion, of British citizens’ tax dollars (USD inflation adjusted) were injected into Leyland and the company still failed.
Wall Street analysts call the phenomenon “Bad-on-Bad Money,” stating that throwing money at these failing auto companies is like throwing a cinder block to a drowning man. I want to tell a slightly different story and one that I have heard far less often in the mainstream media.
That story is what happened when the French government loaned $5.1 billion (USD inflation adjusted) and took a significant ownership interest in a company named Renault in the 1980s. Again, for those that do not know the story, Renault was losing a billion francs a month, and two years after the bailout, they became profitable. Since this “bailout,” Renault has remained profitable and produced some amazing products inside and outside of their product line. Continue Reading →