President Bush has approved $17.4 billion in emergency 'loans' to GM and Chrysler:
The troubled U.S. auto industry will receive emergency loans of up to $17.4 billion from the federal government in return for an extensive restructuring of its outstanding debt and labor costs over the coming year, President Bush said today.
In a step he said was necessary to avoid a “disorderly” collapse of one of the country's staple manufacturing businesses, Bush said the federal aid is meant only to provide a window while the companies decide how to restructure and prove that they can become viable.
If that is not done within three months, Bush said, the federal government will call its loans and let individual companies declare bankruptcy or fail.
The March 31 deadline and other restrictions attached to the loan “send a clear signal to everyone involved. The time to make hard decisions is now…The only option will be bankruptcy.
I haven't seen any professional analysis, but here's my gut-reaction to this news: Bush is wrong, wrong, wrong, wrong.
One of the hooks on this plan appears to be adjusting wages to bring GM and Chrysler into line with their competitors. Of course, the UAW didn't budge one bit on wage concessions in the past few weeks, and shows absolutely no sign of conceding any time in the future, either. Bankruptcy would give a judge the power to force those concessions; Bush's loans don't.
According to Bush's plan, these companies will have to show in three months that they have restructured in such a way that they are 'viable', or they'll be forced to pay back all of this bailout money. That sounds nice, but let's take a realistic look at the situation. These companies have been drowning slowly for decades. Are we honestly supposed to believe that in three months they will magically fix their fundamental business model so that they'll be profitable for a change (especially when the UAW isn't budging on wages)? Puh-lease. And who defines 'viable', anyway? Some Congressional panel that is on the take from the Big 3? Yeah, that'll be objective. And how about the taxpayer's stake in all this? If these companies fail to meet that nebulous 'viable' standard, how are they supposed to pay back our taxpayer bailout dollars? They're already in the hole so far that they can't survive more than a few months without a bailout, so how are they supposed to pay back an additional $13-17 billion? It ain't gonna happen.
To me, this appears to be Bush kicking the problem down the road. He's making sure the auto industry doesn't 'collapse' on his watch, and pushing the problem onto Obama's plate. While that's politically a smart move, it's also the wrong one, if for no other reason than that it is handing the Democrats a monster-sized club with which to beat the GOP. I've already seen it happen on news shows – when Reps complain about Democrat socialist policies like universal health care, the Dem immediately throws back the fact that it is a Rep President who has socialized the banking and auto industry. And you know what? They're exactly right.
That's what we get when we compromise on core principles. This bailout is nothing but bad.
I'll post opinions from the pros as I start seeing them.
There's my two cents.