Bush Bails out Auto Makers - Continues Slow Slide into United Socialist States of America
Motivated, no doubt, by how his newly re-energized “legacy” would look if two of the last three domestic automakers plunged headlong into bankruptcy before he could get the hell out of Dodge Washington, Prez Bush has engineered a bailout. To the tune of $17.4 billion big ones. $13.4 B down and $4.0 B payable February or thereabouts assuming they get Congress to free up the other $350 B of the Big Bailout money (“free” being the operative word here.)
As reported by the Wall Street Journal, the massive gas guzzling SUV auto makers’ bailout is not entirely free though. It is a loan and the guvmint will acquire non-voting warrants (yes, potential ownership in the companies, comrades). The companies have until March 31 to develop plans to show they are “viable” and can continue to operate. Otherwise the loans will be called and, presumably, we’ll be down to Ford as the Last American Auto Manufacturer standing. The whole thing is not hugely dissimilar to the failed Congressional bailout except that gutting the United Auto Workers is optional, not mandatory.
Realistically, who thinks that union auto workers and retirees aren’t going to take it on the chin? However, the car companies must also come up with alternative cost saving plans with dealers and suppliers that will create viability. Additionally they must work with other debtors to reduce their current debt by 2/3 - primarily through debt for equity arrangements. And the New York Times is further reporting that executive compensation must be limited (to the $1 per year they already offered? Hmmm?) and, gasp, corporate jets must be given up! In addition to cost cutting, Chrysler’s parent company has also agreed to fund the company with an extra $2 billion.
Whether the companies have achieved “viability” by the March 31 deadline will be determined by, you guessed it, the incoming Obama administration. Although this plan does not create the “car czar” envisioned by the Congressional bailout package, an individual will be appointed to evaluate the success or failure of the plans.
TPM reports that Obama has made the following statement regarding the plan:
Today’s actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers. With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together—including labor, dealers, creditors and suppliers—to make the hard choices necessary to achieve long-term viability. The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it.
It’s hard to really say “No, the government should let the companies fail” because of their importance to the economy. But it is really galling to me to be bailing out these shortsighted morons who seemed to think the consumers’ appetites for large, gas guzzling, luxury cars and SUV’s would never die; that environmental consequences never had to be considered; that it never made any sense to forecast trends and shift the emphasis of their businesses to fit economic realities. When did they stop to think that maybe “What’s good for General Motors might NOT be good for the U.S.A!” And then, on their first attempt at the Big Beg to show up in company jets! More and more I think we’ve really got to take a look at the kind of people we’re turning out of our business schools and letting in charge of our major industries. But I digress.
Less than three and a half months is a woefully short time period in which to actually go from “crumbling on the verge of ruin” to “viability”. It’s going to be an enormous challenge for them. And, frankly, what would be the chances of getting our $17 plus billion back if they weren’t viable? I’m thinking it might be spent by then. So once again, to paraphrase Dick van Dyke in “Divorce, American Style”, they get the gold mine, taxpayers get the shaft.
Posted by marindenver on 12/19/08 at 05:54 PM • Permalink
Categories: Politics • Election '08 • Barack Obama • Editorials •
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