I think that there is a lot of truth to point number two, but the strategy won’t work in the long run. None of the amounts of money being bandied about do anything but tide GM over temporarily. I think that their financial situation is so much worse than almost anyone realizes. So, even if the democats someone manage to wrangle $50 billion dollars out of the administration, all that does is push the issue under the rug for twelve more months until Wagoner comes around with his hand out again.

At some point the Obama administration is going to have to face the issue and there are only two choices. Either nationalize the auto industry or let them go into bankruptcy – GM as it’s currently configured and operating under its current labor contracts is simply not a viable company.

-exits

Everything wasn’t fine until 2006, and I think that we’d be best served not to try and make that argument if we want to be taken seriously. The writing was on the wall long before then, the bubble just hadn’t actually burst. I hate Nancy Pelosi and Harry Reid as much as the next guy, but blaming any of this on their congress explicitly just makes us look silly.

-exits

The Chrysler “bail out” is a model of how a “good” bail out could/should happen. Lee Iaccoca asked for and got loan guarantees from Congress. When he made the request, he had a new marketing plan they’d just put in place, he had promises of – for the time – significant concessions from the UAW, and they were in the process of streamlining their salaried workforce.

When all was said and done, Chrysler got their federal loan guarantees, they got loans at favorable market rates from commercial sources, they implemented their plans and paid back the loans, never missing a payment and not costing the federal government one nickel.

This time around, it’s a wholly different scenario. The auto manufacturers are going to DC hat in hand begging for money with no marketing plan, no concessions from UAW, no plan to streamline their salaried workforce. They don’t want loan guarantees, they want welfare. And $25B won’t even begin to fix the problem because they will simply piss the money down the same rat hole they’ve been throwing cash for decades.

The part your prof is right about is let ‘em file BK.

1. It did not “set a precedent”. Nobody involved in this bail out is referring to Chrysler’s loan guarantees.
2. It would be a precedent if GM, etal were looking for loan guarantees, they’re not. They’re looking for a hand out.
3. GM etal have not offered any plan, other than what they’ve been doing. Chrysler had a detailed plan and concessions from the UAW.
4. It didn’t take long to spend a billion “back then”. And Iaccoca stayed on at Chrysler and ran the company successfully for many years after the loan guarantee.
5. Chrysler’s current problem is not in any way connected with the loan guarantees or Iaccoca’s management.
6. If you want a “precedent”, look no further back than 60 days to TARP. THAT’s the albatross we’re going to have to deal with forever.

The White House on Friday threw its support behind a plan to speed release of $25 billion in existing loans to the Big Three automakers but rejected a Democratic proposal to use money from a financial bailout to help the troubled industry.

Of course the Big 3 will have hat in hand on Jan. 21st.
Let’s see how much they can get from unbridled President & Congress.

I bet they will get $99 Billion…

Money that will thrown down a rat hole, never to be seen again.

Here is some more info:

A $25 Billion Lifeline for GM, Ford, and Chrysler

Lifeline for Automakers Dangles Just Out of Reach

Originally the loan was not set to roll out this fast.
The bad economy and the credit crunch has contributed to car sales taking a nose dive. But loaning the auto companies money will only prolonge the agony that will eventually come.