Posted November 18th, 2008 at 10.57am in Enterprise and Free Markets. Heritage Senior Research Fellow James Gattuso explains what happens when bankruptcy is declared and why it is a better option for Detroit Automakers
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The author hit the nail on the head when he said a bailout will only delay the inevitable bankruptcy. The auto industry is calling it a loan, not a bailout. Yes, right, a loan that they will not have to pay when they eventually file for bankruptcy. When the airlines went into the red they weren’t given a bailout at taxpayer expense. Why does Detroit think they deserve better?
I’m a conservative and I am torn on this issue because I believe that government intervention is ALWAYS BAD… and that capitalism lends an environment where the strong survive and the weak fail. On the other hand - I live just south of Detroit and I sell materials to the Big 3, including tier 1 & 2 suppliers… my livelihood depends on the survival of the US Automakers. If they file bankruptcy - me and literally thousands of other businesses will have to hold bad/unpaid debts from GM, Ford and Chrysler. This will cause many of our businesses to fold, leading to more failed business and unemployed workers…
I guess I just wanted to point out that there is more than just GM, Ford and chrysler employees at stake here!
What about the creditors and the retirees? Doesn’t bankruptcy mean the creditors only receive a fraction of what they are owed? And wouldn’t the retirees lose their pensions - The very people who are too old to go out and get another job?
Some opponents of bankruptcy say that GM must not be allowed to fail before it perfects batteries for its electric powered Volt, which is supposedly is a key to the company’s resurrection. Congress will give a $7,500 rebate on this over $40,000 vehicle. He also says that opponents of bankruptcy stress that it might terminate health care coverage enjoyed by UAW retirees WHO ARE TOO YOUNG FOR MEDICARE.
Think about it. If people want to retire before 65, that is their business. But there is no public interest in protecting the luxury of retirement in the prime of life just because in the balmy days of good negotiation by the unions and the corporation to establish it as an entitlement for all seasons…
Further, the Volt was built because of pressure and appeasement of the environmentally obsessed automotive engineers in Congress.
I did some research and found that Congress could help the Detroit Three by allowing them, when meeting CAFE (corporate average fuel economy) standards imposed by Congress, to COUNT FUEL EFFICIENT CARS they import from their overseas factories. Now read this part carefully…CONGRESSIONAL DEMOCRATS oppose that because those imports are not made by members of the UNITED AUTO WORKER (UAW UNION). Those Democrats, their rhetoric notwithstanding, really care most about the UNION. “Saving the PLANET” comes second and last comes the health of the auto companies.
The Economist reports that as recently as 2005, Americans bought more cars than did China, India, Russia and Brazil combined. This year those four will buy more cars than Americans buy. That is potentially good news for Detroit. The Economist reports that in the next 40 years, the world’s automobile fleet will surge from 700 million to 3 billion.
Think about it…after restructuring through bankruptcy, the Detroit two or perhaps one might just flourish. So let’s find out.
Anything else, I believe is a doomed attempt to save something that in its current condition is ridiculous as it will take billions of more SCARCE capital that will not be available for job-creating POLICY and investment in rising industries….Think about it….have Congress appropriate that money for our depleted military needs…here we can create jobs in an industry that can protect us. Remember, Reagan said….{Peace through STREGNTH)
[...] 20, 2008 at 7:17 pm · Filed under Heritage.com There are already so many good reasons Congress should deny the Big Three a bailout, but the cost it will inflict on [...]
November 18, 2008 The Bank Bailout is a Fraud | George Donnelly writes:
[...] We need to let these failed organizations fail. Here is a concise (two-minute) explanation of how bankruptcy might do GM some good from the Heritage Foundation. [...]