Ken’s Take: There is zero chance that the Detroit 3 will pay back any bailout loans. Period.
Restoring competitiveness against the “foreign transplants” requires substantial restructuring than won’t be done under the ever watchful eyes of a business-ignorant Congress (how many Reps and Senators have ever run a ‘for-profit’ company — or for that matter — even held a real job?) or until the labor contract is seriously renegotiated (no company can afford to pay factory laborers $150,000 per year in wages & benefits).
Bankruptcy is inevitable, Let’s bite the bullet and get it over with …
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Excerpted from IBD, “Prepackaged Failure”, December 05, 2008
Sentiment running 62% against a bailout for the automakers.
But, Congressional Democrats are desperate to bail out the Big Three — but even more desperate to bail out the automakers’ unions. After all,the UAW spent more than $11 million in the last election cycle to elect Democrats.
Even a “prepackaged” bankruptcy … doesn’t stand a chance because the unions reject it out of hand. As UAW President Ron Gettelfinger put it, prepackaged bankruptcy is “not a viable option.” Translation: Unions would have to make big, and permanent, concessions.
That leaves the latest bright idea: Congress would in essence become the Big Three’s uber-manager, telling them how to become profitable again.
Excuse us, but are we supposed to believe that the same Congress responsible for next year’s estimated $1 trillion deficit can profitably run a market-sensitive company like a car manufacturer?
Or that the same Congress that sat on its hands as the financial meltdown unfolded and helped create the mess will know how to financially restructure America’s highly complex auto business?
Or that the people who just last year imposed $85 billion in new “efficiency” standards on a teetering industry will be savvy enough to run them anywhere but further into the ground?
Does Congress have the know-how to do this? Of the 11 Democrat members on the Senate Banking Committee who grilled Big Three CEOs last Thursday, and who will decide the outlines of any bailout plan, just one Senator — Montana’s Jon Tester, a farmer and former manager of a butcher shop — had any real business experience.
None of the rest, from committee chairman Chris Dodd on down, has any private-sector experience to speak of, apart from brief stints at law firms. Fact is, Congress isn’t equipped to run anything.
The Big Three are burning through $6 billion a month, so $34 billion won’t last long. Chapter 11 bankruptcy, or something like it, would at least let them get out from under costly union contracts.
Given union opposition, this is highly unlikely, even though about 77% of all billion-dollar companies survive bankruptcy.
Those are better odds than congressional mismanagement would offer.
Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=313373158944445
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