The Wrong Bailout

First, we had the Fannie Mae / Freddie Mac bailout. With 5$ trillion dollars in assets to lose, they were too big to allow to fail.

Then, we were faced with a slew of banks needing bailouts: Washington Mutual, IndyMac, First National Bank of Reno, Nevada, to name a few. Check out this site for a complete list. Along with those, we have the mortgage company crisis. This is $700 billion dollar blank check that Henry Paulson was given.
Now, the Big Three auto makers have entered the fray. Ford, GM, and Chrysler want money. GM says they need $4 billion dollars right now, before the year ends.
The CEOs look and sound like drug addicts. They claim they will reform themselves, but they need a fix right now. They claim they will fail if we don’t help them. They claim that a bankrupt U.S. auto industry will weaken us militarily and will undermine our national security (Chrysler CEO Robert Nardelli). They try to bargain, then use fear-mongering to try to keep from losing their gravy train, or their addiction to their own largess.
Would auto bankruptcy really be a bad thing? Sure, there would be a stigma, perhaps, attached to the auto maker(s) that got hit by bankruptcy. If, on the other side of darkness, a good product that people could be proud of was produced, that might lessen or eliminate the stigma. But stigma is not a good reason not to do something . . . to me, anyway.
Here are some thoughts about a potential bankruptcy plan:
  1. Bankruptcy does not mean the doors on the plants are closed and locked forever, probably not at all.
  2. Done the right way, bankruptcy could keep people in their jobs (at least some) while the company was reorganized.
  3. Labor contracts would be nullified, allowing more reasonable labor contracts to be created. Sure, getting paid 90% of your salary should you be laid-off sounds great, but is that really feasible? This would help them get their costs under control, for sure.
  4. Bankruptcy would force a restructuring of the Board of Directors. These are the real felons. They are the ones that control the flow of funds and stymie innovation. Remove them and in their places put in people who know how to innovate.
  5. Bankruptcy may help create a new Ford, GM, or Chrysler that is lean, mean, and able to compete in the global marketplace.
  6. The automakers need to realize that this is not the 1950’s. Thought processes must change or adapt to meet the needs of the 21st century. To me, it seems like the automakers would rather spend millions lobbying Congress to impede progress, than be the forerunners of progress. I say this specifically to comments regarding the cost associated with fuel efficiency and alternative fuels (that are not corn-based). There is a market for such cars.
  7. GM was bailed out in 1979. Why did they not learn their lesson then. Why are they repeating the same mistakes 30 years later?
  8. If there is money available, why not give $1, $2, $4 billion dollars to finance those companies like Tesla Motorcars to get them up to production levels?
  9. Bankruptcy might finally force the car maker culture to wake up and smell the coffee. The fact that this industry is in the shape it is in is humiliating and embarrassing. The U.S. was once the world leader in automobiles, in innovation, technology, design. Now, all we have proven is how sedentary and entrenched we have become, lazy and boring.
In my mind, bailing out GM, Ford, and Chrysler is the wrong bailout.
So, if that is the wrong bailout, what is the proper bailout? …
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