Big Three Bailouts at Any Cost
The United States is trying to give the impression that auto industry bailouts will be decided using objective criteria. But Obama can’t afford a GM bankruptcy now as easily as he could a few months ago.
Compared to the American automobile industry, the problems German manufacturers face seem almost like child’s play. While demand is falling for both, American carmakers have to deal with mountains of debt and an undesirable model lineup.
Governments in both countries feel compelled to give them aid but the way they’re going about it shows how different the dimensions of the problem are for each. In Germany, paying a premium to those who trade in their old wrecks for new cars seems to be enough to send manufacturers into a state of euphoria. In the United States, meanwhile, the government faces the task of having to rescue stumbling giants General Motors and Chrysler from bankruptcy, thereby saving a piece of old America.
With that, Barack Obama’s administration has fallen into a dilemma from which there seems to be no way out. Even if Obama says again on Thursday that the companies have to be willing to undergo basic restructuring, it appears already a done deal that Washington will give them billions more in bailout money. Whether that’s a workable solution for the future of the two companies is a mere afterthought.
The U.S. president is walking a tightrope: while a majority of Americans are opposed to further bailouts for dying car manufacturers, Obama, whose popularity numbers are already in decline, cannot afford to annoy the auto workers unions that helped put him in the White House. Massive job losses in Detroit would be the handwriting on the wall which could burden Obama’s entire term in office.
Pressure to bail out the auto manufacturers has increased over the past couple of weeks. First, the entire U.S. economy continues to take hits. Then, many Americans are beside themselves with anger due to the AIG manager bonus fiasco. If Obama allows GM to go bankrupt, he risks being accused of throwing billions to a few bankers and then claiming there’s not enough money to help hundreds of thousands of hard working auto workers.
The U.S. government also senses that saving the auto giants could be a dangerous undertaking because the companies could become permanent black holes for billions of dollars.
Obama seeks to avoid this problem by having a formal, independent taskforce evaluate the companies’ restructuring plans. Regardless of the technical competence of such a team, and regardless of how predictable their findings might be, delegating the decision to a group of seemingly independent experts will be quite advantageous for the government: they’ll have a permanent forwarding address for any future accusations that may come in.
Such maneuvers are politically understandable, but they really have nothing to do with accomplishing the required goal. The United States isn’t getting any closer to a sensible solution that will help their faltering automobile industry.
Compared to the American automobile industry, the problems German manufacturers face seem almost like child’s play. While demand is falling for both, American carmakers have to deal with mountains of debt and an undesirable model lineup.
Governments in both countries feel compelled to give them aid but the way they’re going about it shows how different the dimensions of the problem are for each. In Germany, paying a premium to those who trade in their old wrecks for new cars seems to be enough to send manufacturers into a state of euphoria. In the United States, meanwhile, the government faces the task of having to rescue stumbling giants General Motors and Chrysler from bankruptcy, thereby saving a piece of old America.
With that, Barack Obama’s administration has fallen into a dilemma from which there seems to be no way out. Even if Obama says again on Thursday that the companies have to be willing to undergo basic restructuring, it appears already a done deal that Washington will give them billions more in bailout money. Whether that’s a workable solution for the future of the two companies is a mere afterthought.
The U.S. president is walking a tightrope: while a majority of Americans are opposed to further bailouts for dying car manufacturers, Obama, whose popularity numbers are already in decline, cannot afford to annoy the auto workers unions that helped put him in the White House. Massive job losses in Detroit would be the handwriting on the wall which could burden Obama’s entire term in office.
Pressure to bail out the auto manufacturers has increased over the past couple of weeks. First, the entire U.S. economy continues to take hits. Then, many Americans are beside themselves with anger due to the AIG manager bonus fiasco. If Obama allows GM to go bankrupt, he risks being accused of throwing billions to a few bankers and then claiming there’s not enough money to help hundreds of thousands of hard working auto workers.
The U.S. government also senses that saving the auto giants could be a dangerous undertaking because the companies could become permanent black holes for billions of dollars.
Obama seeks to avoid this problem by having a formal, independent taskforce evaluate the companies’ restructuring plans. Regardless of the technical competence of such a team, and regardless of how predictable their findings might be, delegating the decision to a group of seemingly independent experts will be quite advantageous for the government: they’ll have a permanent forwarding address for any future accusations that may come in.
Such maneuvers are politically understandable, but they really have nothing to do with accomplishing the required goal. The United States isn’t getting any closer to a sensible solution that will help their faltering automobile industry.
the last paragraph says it all.
as a former consultant with the big three the problem is leadership and a results only paradigm.
even with nationalism and patroitism americans buying their cars and trucks the big three are doomed without gov help.
the restructing will be layoffs. mark my word.
giving money to the same leaders that caused the bankruptcy does not pass management 101.
but then most politicans and economists could not pass management 101.
like letting the fox guard the hen house and then buying more hens when they all disappear. the solution then by congress is to let the fox continue to guard all the new hens in the hen house.
america is in a economic meltdown but keep lending us more money so we can pay you all back with a devalued dollar and this allows us to keep our imperialism going and be known as a super power. that is the most important thing to we americans what else do we have to brag about.
we feel so strongly about our military might that we have southern states that raise their children to fight in our wars for profits and call them heros for doing so.