Thursday, December 11, 2008

The Auto Maker "Bailout" Is Dead-For Now

It appears that the so-called United States auto maker "bailout" for Chrysler, Ford and General Motors has died a timely death.
But, do not expect this behemoth to go away any time soon.
The defeat came on a procedural vote in the senate, which received the House version of the bill earlier in the day.
And General Motors does have the wherewithal to realize that time is running short and according to this report from the Drudge Report is hiring outside council to at least look into the prospect of filing for Chapter 11 bankruptcy protection and reorganization.
So, lets take a look at the possibility of one or all three United States automakers filing Chapter 11 bankruptcy protection and reorganization.
Jim Manzi in National Review's The Corner provides some excellent analysis on this issue.
When there talk that up to 3,000,000 people will lose their jobs as a direct result of the filing, it is not all directly linked to the auto industry. It is the outliers. As Mr. Manzi points out, it is the people that maybe work at a 7-Eleven, who would lose jobs because people that used to work for any of the Big Three no longer buy their coffee there. And, then the 7-Eleven people not working would no longer shop at the local K-Mart because they are out of work.
If indeed the worst case scenario occurs and 3,000,000 lose their jobs, that is about two percent of the American work force. At a current unemployment rate of 6.7%, it would go up to 8.6%. At the height of the last worst recession, 1981-1982, the unemployment high was 10.8%.
Now, to be clear, no one likes and or wants to see any American worker lose their job. And it is that prospect that drives the government to make irrational decisions, such as offering a life line that does not end.
As Mr. Manzi points out, what makes anyone believe that the $14,000,000,000 asked for by the Big Three auto makers will be enough. Considering that fact that this is being called a "bridge" loan, it will not be anywhere near enough. Is there not a possibility that the end result could be as much as $100,000,000,000 given to the Big Three auto makers? Of course!
And with that money will come a great deal of strings including agreeing to the concept of a "Car Czar". Is that something that we really want to happen out of this? Can a "Car Czar" really make any better decisions than any of those in the auto industry that have made the bad decisions in the first place? It is doubtful.
The real issue is the thought that one of the largest parts of the private sector wheel will have to ask for protection and time to reorganize for better business practices and maybe actually looking at how successful car makers are able to make it. It is, without a doubt a psychological blow in a spiralling economic down turn. But it is necessary for a better end result and to maybe really save jobs in the long run.
The government handing out money and putting unrealistic strings on it is not the long term solution.

3 comments:

Rightwingsnarkle said...

It is, without a doubt a psychological blow in a spiralling economic down turn. But it is necessary for a better end result and to maybe really save jobs in the long run.

You'll have to explain what's psychological about no pay check.

Though, to be honest, when it comes to people's lives, wingnuts really don't care.

This one's on you - the Bush Depression.

Rightwingsnarkle said...

A precipitous collapse of this industry will have a severe impact on our economy. It would be irresponsible to further weaken or destabilize our economy at this time.

Who would say such a thing after the wingnuts started crowing about 'killing the auto baillout?'

OMFG! It's the White House!

Freadom said...

I'm thinking that with the impending bankruptcy, the unions might be forced to make cuts anyway. It's interesting