Friday, December 12, 2008

Ding dong, the bailout's dead!

The Big Three auto industry bailout died last night in Congress. On a largely party line vote, the last test vote 52-35-12, i.e. 52 votes for a bailout with some strings, 35 votes for forcing the industry to fix its cost structure, and 12 votes too chicken to stick their necks out. Perhaps this will end the habit of bailing out companies that are either badly run, or that have structural problems that cannot be resolved without wiping the slate clean.

The Big Three keep screaming “recession” as the cause of their problems, but the rest of the auto industry will survive just fine. The current economic woes are merely exposing the depth of the companies’ self-inflicted problems, including uninspired product design, unsustainable labor costs, and smoke-and-mirrors balance sheets.

Ford appears able to hang in there for now. Apparently now GM and Chrysler are starting to take seriously the bankruptcy option, which is what most firms do when their problems become unsolvable.
Toughlove means that you say no to a dysfunctional friend or relative and stop acting as an enabler for the pathologies that got them in trouble in the first place. It would be best for the country if the Big Three (Dying Two) will face up to their problems, but it seems more likely that they will keep their focus on lobbying for a better deal — now, from the 111th Congress.

No comments: