Bankruptcy Not Bailout for Auto Industry

Congress and the American automobile industry’s CEOs from GM, Ford and Chrysler continue their kabuki dance in Washington. In public view it would appear that politics and business as usual are responsible for avoiding a sensible approach. From concerns about an initial bailout of 25 or more billion taxpayer dollars being offered as an early Christmas present for automakers the latest figure in the press seems to be 15 billion with oversight. Is that the Congressional effort to make the whole thing more palatable to the general public? Lowball the front end offering and when things quiet down hand them more money when no one is looking? Why are the carmakers not being required to use the typical restructuring plan of bankruptcy available to all troubled businesses?

Senator Bob Corker (R-TN) stopped just short of advocating bankruptcy for the automakers. His plan concludes with the following statement. “These are the same types of conditions a bankruptcy judge might require to ensure that these companies become viable and sustainable into the future, and if they will agree to these terms then we have something to talk about. The process I have suggested would allow them to avoid the problems and stigma that accompany a formal bankruptcy, while forcing them to do the things they need to do to be successful companies.”

The ‘problems and stigma’ Senator Corker states pale in comparison to the refusal of automakers to accept the fact they have done little to remain competitive over the last few decades. Bankruptcy is exactly the course that should be taken. It requires the same entities who were involved in this failure, the automakers and their creditors, to arrange for salvaging the situation they all contributed to without involving the American taxpayer. The same could be said for other bailouts on the public dime but it is probably too late for that but no reason for allowing the insanity to continue.

Progress made in bailout plan for Big 3 automakers

WASHINGTON (AP) — Congressional negotiators continue hammering out legislation that would dole out billions to automakers — but promises to yank back the money if a government-run board and overseer decided the companies weren’t taking steps to overhaul themselves.

The plan would draw the emergency aid from an existing loan program meant to help the automakers build fuel-efficient vehicles. The size of the package hasn’t been finalized, but it is expected to be about $15 billion, several congressional aides said.

The unnamed Congressional negotiators and aides as well as the attempt to convince the public their money will be carefully utilized to save the auto industry provide little comfort based on Washington’s track record for decision making to date. It would not be a surprise if the politicians and business ‘leaders’ in this particular scenario employ the time tested tradition of dragging this out until the average citizen loses interest and they have no fear of public outrage to do what they planned from the beginning. Let the public pay for the fiasco. Perhaps that is why they always express concern for the ‘middle class’ as that is the group who shoulders the burden of paying for politics as usual.

Not that the general public shares no responsibility for the current economic problems and the bailout frenzy active in the nation’s capitol but they are not in as strong a position as those who control government and corporate America when it comes to influencing the outcome of public affairs. If the current problems and their implications for the future strength of the American economy are not sufficient to cause the public to change that fact it is likely nothing ever will.

(A Monday report from Reuters suggests a deal may be completed today. Wonderful, just wonderful :-(

Stanford Matthews

6 Responses to “Bankruptcy Not Bailout for Auto Industry”

  1. Debbie Says:

    Too bad Congress did not drill the CEO’s of the original benefactors of these bailouts, Fanny, Freddie, and on and on. I would love to see the irony of Barney Frank drilling those guys. Pot meet kettle.

  2. Perri Nelson Says:

    How could Barney drill himself?

    With all of these bailouts pretty soon the U.S. Government is going to need a financial bailout. I think I can wait on that one — for a long time. The total cost of the bailouts is rapidly approaching the size of our annual budget already. With States in line next, where is the money going to come from other than the printing presses run by the Treasury?

    Are you ready to see the dollar deflated so that it looks like the Peso?

  3. Stanford Matthews Says:

    My guess is all this will eventually shake out and be over and done with. The problem is what the casualty list will look like. Something tells me those most deserving of the pain and suffering will emerge unscathed and the ordinary folks will as usual bear the highest cost. While that should encourage them to challenge those in the power positions past experience would indicate that will never happen.

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