Exponential Absurdity

The graph below shows the hypothetical growth of the Big Three's (or Small Three as re-named by Larry Kudlow) government provided finance requirements assuming a growth pattern similar to the one we saw between Detroit's first plea to Congress on 11/23/2008 and their second plea, two weeks later, on 12/02/2008. While this analysis is highly over simplified and based upon a relatively unrealistic and consistent exponential growth rate assumption, its purpose is to serve as a hyperbolical illustration of the depth of the financial and strategic management issues facing these firms.

The fact that an organization's financial requirements can increase by 50% in a two week period, both GM ($12b to $18b) and Ford ($6b to $9b) , serves as an insight into the significant financial and strategic mismanagement issues facing the Big Three.

As Congress contemplates providing the Big Three with the now requested $34b a very simple question arises, and it isn't the now famous, are they too big to fail, but rather are they too big, inefficient, and debt laden (both to traditional debt holders and to their union workers) to save? Regardless, before any money is given to the Big Three the government should insist on evidence of significant discussions and movement towards union policy reform (the only way Detroit can become competitive again) and the presentation of sufficient revised business strategies (not the ones that were presented to Congress yesterday).