Fam62c

Do the Automakers Deserve a Bail Out?

I don't want to see the US auto industry (all 3 of them anyway) gone because once it's gone it can never really come back; it's almost impossible to start up an auto company from scratch. I don't think a "bailout" or even a loan is the best way to go. If they can't make it, I think that they need to reorganize in Chapter 11 with some type of government backing for dip financing IF the creditors approve the reorganization plan. Detroit is like an alcoholic, it needs to reach rock bottom before it can start over. If we prop up any of these companies with government money outside of bankruptcy they will simply become dependent on support. Chapter 11 has a way of making everybody get serious because they realize that total failure is now possible. In chapter 11 even the sacred cows get slaughtered. If the taxpayers are going to get involved every stakeholder must give all they can possibly give and Chapter 11 is the only way I know of to make this happen. Plants must be closed, people must be laid off, models, brands and dealers must be dropped, assets must be sold off or collateralized, leases must be rejected or renegotiated, labor contracts must be made competitive in the current environment and liabilites must be shed; in short the companies must be totally re-designed. A government loan guarantee isn't going to make these things happen. Where's the sense of urgency? What is a company like GM doing right now on it's own? Is it stopping payment to creditors to conserve cash? Has it announced plans to shutter one or more of it's many divisions? Is it putting assets up for sale? Are they demanding concessions from their unions? Is the management team taking steep pay reductions to set an example? If they think they can just get a loan guarantee from the government they will drag their feet and not act as if their survival is at risk. I know they don't like to use the "B" word but when you are telling everybody that you might not have enough cash to see the new year it's really the same thing. It's time to start planning for a pre-packaged Chapter 11 filing. They will make it through bankruptcy just like the major airlines did because their creditors have too much at stake to let them fail. Remember the old saying; if you owe the bank a million dollars you have a problem, if you owe the bank billions of dollars the bank has a problem.

I'm worried about taxpayer money being used to pick winners and losers among private industry. How do we decide who to help and who not to help? Where was the bailout for, say, Circuit City? The banks were one thing because the government has authority in that area but where do we stop when we decide to help private industry? What if everybody comes forward with their hand out?

By the way, what about Chrysler? They are owned by a private equity company, why should the taxpayers loan them money. Shouldn't the private equity company raise money to help Chrysler since it's their investment? Isn't re-capitalization what they do? They just bought Chrysler I think that it's their problem. Chrysler certainly shouldn't get any government help until their parent company has given every last penny to the effort.