Last night while marshaling votes for the House’s eventual 237-to-170 vote in favor of nationalizing Detroit, House Majority Leader Steny Hoyer (D-MD) told the Wall Street Journal: “If we do nothing we face the risk that sometime soon there will be no American auto industry.” Hoyer has it exactly backward. A government takeover of the Big Three represents the biggest threat to their long-term existence, while a Chapter 11 restructuring is the best way to ensure the long-term viability of the industry. Bankruptcy Does Not Mean Death: The auto nationalization …
There’s been a lot of good discussion on the auto bailout over the past day or so. And by good discussion, I mean pointing out how utterly ridiculous an auto bailout is. Our own James Gattuso lays out Congress’s plan in his latest paper: “Eligibility for the program is limited to firms that submitted restructuring plans to Congress on December 2–thus limiting participation to General Motors, Ford, and Chrysler, since they were the only firms asked to submit such plans. Aid would be provided in two stages: an immediate bridge …
June 4, 2008, must seem like light years ago for Detroit. On that Wednesday night, the Detroit Red Wings hoisted Lord Stanley’s Cup in Hockeytown, U.S.A. Since then, it’s been nothing but the doldrums. The Detroit Lions have managed to lose every single football game in the 2008 season and are on the verge of remaining winless this season. Of course, the bigger news is that Detroit’s Big Three automakers are struggling, and the chief executive officers of Ford, GM and Chrysler will make their second trip to Capitol Hill …
In an Op-Ed peice about the Auto-bailout that appeared in today’s DC Examiner, Lori Roman equated the government bailing out to sending arsonists to fighting fires: One would think that, since the government created the crisis, they should fix it, right? No. They should STOP interfering with the markets, not interfere more! They should let lenders make prudent loans and let energy producers produce energy and they should let the automakers get out of this mess without government meddling. You don’t send folks with gasoline to put out a fire. …
Heritage Senior Research Fellow James Gattuso explains what happens when bankruptcy is declared and why it is a better option for Detroit Automakers [youtube]http://www.youtube.com/watch?v=6wKGODqsZ2o[/youtube]
When I think of bankruptcy I think of this. That’s right, the Monopoly Guy. Pockets empty. Shoulders shrugged. Game over. All the jobs will be wiped off the face of this earth and bulldozers will tear down the buildings. I’m guessing a lot of people think this way when they hear this word. Rich Wagoner, Chief Operating Officer of General Motors, seems to think this way. He recently declared that, “We are convinced the consequences of a bankruptcy would be dire and extend far beyond General Motors and therefore we …
Automobile sales have plummeted across the board for the month of September. Not only were sales down for Chrysler (33%), General Motors (16%) and Ford (34%), but Asia-based brands Toyota, Honda and Nissan fell 30% over the course of the month. Sales in European and Asian markets are down as well. Can we blame the credit crunch? That’s certainly part of it. Todd Greenbaum, general sales manager for Castle Hyundai in New Castle said, We’ve had people with what seemed like OK credit, but we still couldn’t get them a …
Last week the House approved a $25 billion loan for Detroit’s Big Three that, if signed into law, would cost taxpayers $7.5 billion. General Motors, Ford and Chrysler claim they need assistance to make the switch from gas-guzzling vehicles to more cars with better fuel-efficiency. We’ve broken down a few of the reasons why Detroit’s business model has been failing. One reason is simply their choice to remain committed to building minivans and SUVs. As gas prices rose and consumer demand slowly shifted to more miles per gallon, Detroit’s Big …
Almost 30 years ago, a steep rise in oil prices drove consumers to buy smaller, more fuel-efficient cars. Cars that American auto manufacturers simply didn’t make. The resulting huge drop in sales drove Chrysler to the brink of bankruptcy, but before the market could play itself out, President Jimmy Carter came in “rescued” Chrysler with $1.2 billion in loan guarantees. At first glance it may appear that Chrysler was saved from bankruptcy. But a closer examination of the record shows that even with the loans, Chrysler went through a quasi-bankruptcy. …
Nothing gathers a crowd in Washington like the sight of money being handed out. Thus, in the wake of last weekend’s federal takeover of Freddie Mac and Fannie Mae, lobbyists for the automobile industry could be found stalking the halls of Congress, asking for help from the government too. Specifically, they are asking for $50 billion in federal loan guarantees to develop alternatives to conventional fossil fuel vehicles. The idea has garnered surprisingly broad support — with both Barack Obama and John McCain both expressing support for aid to the …
