Bailout loan or bankruptcy are the options facing a big three automakers. A reporter for NBC said America is feeling “bailout fatigue.”
Yesterday’s heated congressional hearings proved a politician can make exceptions to our current loan and bankruptcy laws on a fly. In this economy, the free market principles are definitely lining up behind government for the next power move. Bailout, loan, or bankruptcy are almost identical in Congress speak.
The big three automakers would prefer a bailout, even if it comes with strings attached like restructuring their companies from the ground up.
Carly Fiorina (former CEO of Hewlett-Packard) told MSNBC that Congress could persuade one of the nine banks we bailed out to lend money to the auto makers since they are not creditworthy. This leaves those taxpayers at risk. It’s funny how politicians can make good sense in the off-season,
Mitt Romney said bankruptcy was the best course of action, in order to restructure the existing contracts with the unions and vendors. I see this as another attempt to break up the unions, who have already made concessions. The union signed a new contract for less benefits and dropping their hourly pay demands from $28.00 to $14.00.When asked “why would a person buy a car from a bankrupt company?” Mitt said the government could back up the warranty…Free market with government backup.
“Good morning Joe” had a lively discussion and many good points were made. They all agree if you’re seeking protection from your inevitable downfall the automaker should agree to a few suggestions.
1) They should immediately fire the current CEO’s and board of directors and replace them with outside successful managers with a salary cap of say $250,000 with incentives.
2) The government should demand that automakers make green cars as a priority and raise their CAFE standards to a minimum of 40 MPG.
3) Develop a six months look back period at the company’s profitability trends, and if one is not meeting expectations, that company would either merge, go into chapter 11, or liquidate depending on the trend.
4) Make all the companies dispose all the luxury items like corporate jets condos and lucrative expense accounts.
Personally, I would like to see the big three automakers survive, because three million jobs would be lost and making good automobiles is what this country is all about. True, the car industry’s vision for the 21st century was still in the 20th century mode. These companies fought tooth and nail against mandatory seat belt installation and higher CAFÉ standards. One company is still building Hummers.
The democrats want the Michigan automakers with unions to stay afloat because that voting bloc is important. The republicans would love to see another union go down and they see a possibility of the south (their only power base) being a great location for making cars at a profit without union pay or benefits.
I think this Congress will punt and let the new administration deal with the problem. I could be wrong.
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