What Next for Detroit, the Big Three and the Auto Industry?
Last night, Senate talks on the auto bailout broke down, an ominous sign for the future of the U.S. auto industry. Some 730,000 people are employed by the Big Three, and there's no telling what the effects of their collapse might have on the U.S. economy. But President Bush could still allocate a portion of the $700 billion Wall Street bailout to the ailing automakers. Should Bush step in and allocate money to the Big Three himself? If not, what happens next for the domestic auto industry and the economy as a whole ?
Previously: Will Rod Blagojevich Hurt Barack Obama?
Reader Comments
UAW
The UAW is at least a great part of the mess that the auto makers are in. The UAW are full of greed and run the plants, If a UAW worker farts and does not like the smell he just request a committee man call so he can cry to the UAW. That shuts down work for awile, and loss of work done. I would just love to see the UAW go away and right now. I have seen this for myself, the UAW run the plants. Lets pay good peop;e a good wage and get ride of the premodonias the are UAW. Bring in the Courts and get ride of the greed of the UAW.
Chapter 11 by another name
Providing a Car Czar will with the authority of a bankruptcy judge will allow companies to change contracts that otherwise can only be done in BK such as cancel leases, renegotiate contracts and terminate other obligations. Shareholders including Ceberus and me will be taking it in the shorts. Bond holders will become shareholders. Banks that are unsecured debtors may not be paid in full but vendors who are needed by the industry will need to be paid in full to assure that they can continue to stay in business and get the credit they need to continue. New unsecured debtors will have priority over earlier debtors.
The concern about obtaining parts is a red herring. Parts is a very profitable business that can be easily sold off to private firms that will be lining up to be the exclusive suppliers of Taurus fenders and Escalade bumpers or Intrepid doors.
What will be more challenging is coming up with a business plan that brings the car companies into profitability at realistic sales volume. This will require a change in management because the current batch are a bunch of greedy idiots.
No bailout, but if there has to be, help only Ford
While I am against a bailout, if there is going to be one anyway, it makes the most sense to help the company that is the most fit to start with. Ford must already have the best management, so if we have to help anyone, it might as well be the one that has the best chance to be successful. No use subsiding the businesses that have already proven to be the least competent; rewarding bad behavior, especially on this scale and at this cost would be ludicrous and only lead to more trouble in the future.
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