Bankruptcy Postponed

There is no alternative to government aid for American automobile manufacturers

The Big Three automobile manufacturers will get billions of dollars in taxpayer aid. True, they’ll only get $15 billion instead of the $34 billion they asked for, but that will be enough to get them through to next spring. There really wasn’t any alternative to giving them the money. Between administrations, they really couldn’t allow two of the three, General Motors and Chrysler, to go bankrupt, could they? When unemployment is the highest it’s been in 34 years? Not an option for anyone who doesn’t want to see Obama’s atmosphere of optimism nipped in the bud. To that extent, not even the greatest SUV-hater or the biggest critic of America’s love affair with the automobile could be against a government bailout.

But here’s the question: What happens after March, when the $15 billion is gone? First of all, the companies will ask for more money. Then, a few months later, neither the new model line will be introduced nor will the economic outlook have improved. On the contrary, it will be worse. Then new financial aid will be made dependent on strict new guidelines. To that extent, it makes sense to appoint the new “Auto Czar” now being proposed. The Czar would have oversight of how resources are used in the pending restructuring. It’s a good idea.

Second: It’s highly likely that one of the three companies will have ceased to exist by the end of 2009. That will probably be Chrysler, who, after separating from Daimler-Benz, is now the weakest of the Big Three. Whether there’s a forced merger between General Motors and Chrysler or Chrysler goes into liquidation is still an open question. The latter would make more sense, since restructuring General Motors will take a Herculean effort in and of itself. Finally, except for the electrically powered Chevrolet Volt that will be developed by Opel in Rüsselsheim, the gigantic mother company hardly has a project fit for future markets.

Without such projects the required financial help can only delay the death of the American automobile industry, it can’t prevent it.