What to make of the U.S. Treasury's extension of a $17.4 billion TARP loan to General Motors and Chrysler? Way to go, inside the beltway gents and ladies!
Indeed, the plan, which contains performance requirements and thresholds that monitor viability, will be castigated by the right and left, by everyone from libertarians to vegetarians, but they won't sway economist Richard Felson into opposing the action.
"Arguably, this is the best economic news we've heard this year, outside of the oil price drop, and that shows you what type of year we've had," Felson said. "With a GM (NYSE: GM) and Chrysler failure, the U.S. economy would have neared a depression, with probably disastrous consequences for the U.S. stock market. Look on this loan not as an auto bailout, but as the first step in the restructuring of the U.S. economy."
Loan / restructuring package buys time
Is it the best use of taxpayer dollars? No. But who's to say this is not a good use of those funds, particularly during a national crisis?
Does it violate American norms of rugged, free market capitalism? Pretty much.
Does it reward prior auto manufacturer misdeeds and bungling? Indeed it does.
But the package gives the auto makers the time and incentives to restructure, and also continues to deploy and enhance the vast assets -- and equally significant, the enormous engineering and design brainpower -- of the sprawling and diverse auto manufacturer network. Those assets must never be idled.
Auto Sector / Economic Analysis: It the midst of a financial crisis and a U.S. recession, an auto manufacturer cessation would have been disastrous. Look not on this package as a 'bailout,' but as the first step to "get this economy moving again," to quote President John F. Kennedy.
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Reader Comments (Page 1 of 1)
12-19-2008 @ 9:48AM
Gene said...
The bail out is good but will it work? I don't thing it will work unless people can start to purchase cars. NO Jobs and money to lend will result in sales amd no sales wil bring the auot business down. This is just a bandaid on the bad economy.
12-19-2008 @ 10:02AM
John said...
Maby now we can work on a bailout of the construction industry.
12-19-2008 @ 11:00AM
Ron said...
Keep an eye on Toyota and Honda and all the rest of the foreign corporations. There in trouble too!
We don't need to be lending them tax payer dollars at all.
Buy American! the job you save may be your own!!!!!!!!
12-19-2008 @ 2:59PM
Iridium said...
Look GM is dead nomatter what. It doesn't matter if 1 million people go out and buy a Malibu tommorow. That won't save the company.
The bailout isn't for GM it is for the UAW. GM will never succeed as long as the UAW remains in control. The legacy costs on GMs books will never allow the company to compete. They have far too many dealers and far too many products.
In fact all the car companies have too many products. Cars, trucks, vans, SUVs, crossovers, it is all too much. The UAW is what is at fault here.
The best car lineup is actually from Mazda, as long as they get rid of the forced Ford rebrands like the CX-9 and Tribute. In fact Fords hope in the US is all based on products it based on Mazda production in this country.
Mazda has a class leading compact car, a great small van, a good crossover, a very good full size car, and a quirky sports car you can't get anywhere else. They don't need a big SUV or a truck.
All this bailout will do is give GM the money it needs to keep going for a few more months. When the economy gets worse next spring we will need to give GM even more money. They can't turn this thing around in 3 or 4 months. It is going to take years.
Bankrupcy is the only option. I know there are a lot of part suppliers out there that will go out of business as well, but that is what you get when you back one horse.
The problem is that GM has been using fasteners that can't be applied to other manufacturers and the cost to retool the small factories would put them out of business. This is another fault that can be blamed on the UAW.