News Videos
World
International Edition

Sunday

September 24, 2017

Breaking News, World News and Taiwan News.
About Us
E-Newsletter
Advertise
Contact Us

Bailout or bankruptcy for Big 3?

Some would say that the only good thing about President Bush's decision to loan American auto companies Chrysler and General Motors US$17.4 billion between now and February is that it avoids complete chaos during Christmas. Beyond that, bailing out American auto makers is a dicey proposition that could fail to cure decades of mismanagement.

As it stands, Chrysler and General Motors announced plant closures and lengthy suspensions of production. With large inventories of unsold cars on lots all over the country, it would be a good idea for them to keep their plants idle until March 31, the deadline the two bailout beggars have been given to come up with sustainable restructuring plans. Their mendicant CEOs will need every minute between now and then to come up with a workable alternative to managed bankruptcy — or an even messier forced liquidation.

While Ford declined government loan assistance as unnecessary, a cash crunch by the end of 2009 is likely if sales do not improve. Ford might benefit from the failure of its domestic competitors, but only if more Americans buy Fords instead of Toyotas, Hondas and other foreign brands manufactured in the U.S.

Before President Bush offered GM and Chrysler a lifeline, we saw the Detroit CEOs arouse nationwide ire by coming to the Congress in private jets. They had no plan in November, and when they returned in cars at the beginning of this month with a US$34 billion request instead of the US$25 billion originally proposed, it became clearer than ever that they have no real idea how much money they will need to survive. Congress heard independent testimony that it could take US$75 to US$125 billion to keep the American automakers afloat for two years, until they might be able to hobble along in an improved economy.

There has been a consensus of sorts that bankruptcy now, without a clear idea of how to get out of it, would have disastrous consequences. Troubled parts suppliers, dealerships and others dependent on the industry would also fail, adding three or four million people to the swelling ranks of the unemployed. Economists of all political stripes warned that this would lead the downward spiraling economy into depression.

President-elect Obama agreed that American automakers in desperate straits should be helped now, but declined to commit to saving them unless they could come up with viable restructuring plans. This view gained the support of the White House, most Democrats, and some Republicans, but arguments sprung up everywhere.

Conservatives argued that government intervention in industry never works; allowing market forces to play out is the only real solution. The American economy has always been built and rebuilt on creative destruction. If the domestic car makers cannot survive in a free market, the foreign producers in the United States will take their place.

Economists and leading Democrats asserted that the loss of the American industry and the engineering expertise concentrated there is not an option. The anticipated job losses and depression that would follow a collapse of GM and Chrysler are the locus of fear that underlies support for saving a dying breed of head in the sand manufacturers.

Agreement between the Democratic Congressional leadership and the White House that the automakers should get money now did not overcome the disagreement over where bailout loan funds should come from. House Speaker Nancy Pelosi refused to tap US$25 billion that had been designated for research and development of greener vehicles. She insisted that the loan should be given from the US$700 billion Troubled Assets Relief Program (TARP). The White House refused to tap TARP funds, asserting that money allocated for saving the financial system should be used only for that purpose; otherwise every troubled industry would seek a government bailout.

MOST POPULAR OF THIS SECTION
Advertise  |   RSS Feed  |   About Us  |   Contact Us
Home  |   Taiwan  |   China  |   Business  |   Asia  |   World  |   Sports  |   Life  |  
Arts & Leisure  |   Health  |   Editorial  |   Commentary Travel  |   Movies  |   Guide Post  |   Terms of Use  |  
  chinapost search