Bailout Watch 117: General Mopar Would Be Too Big To Fail

by Edward Niedermeyer

Published: October 16th, 2008

bailout watch 117 general mopar would be too big to fail

Fresh off his recent membership in TTAC’s Cassandra club, Daniel Howes of the Detroit News has gone back to spinning bad news into industry gameplans. His latest column extolls the virtues of a GM-Chrysler merger, while admitting that such a move would be disasterous for everyone except GM and Chrysler. “Seen from the viewpoint of blue-collar labor, white-collar employees, local governments, dealers, the state of Michigan and the industrial Midwest, just about anyone whose livelihood depends on the dubious survival of Chrysler would pay a dear price,” writes Howes of a possible GM absorption of Chrysler. But, from the narrow perspective of an industry suit, these myriad viewpoints are just so much firewood to be burnt at the altar of survival. And Howes is conveniently on hand to stack it up and pass the matches.

“In the near term, a fattened GM in the United States arguably could become ‘too big to fail,’ a cynically convenient achievement in today’s climate of political change, economic uncertainty and market intervention.” Not that Howes doesn’t have qualms about such a move. “There are all sorts of reasons why GM shouldn’t qualify for fed help: That its troubles are self-made, the legacy of decades of labor-management ineptitude; that its brands are destroyed, despite recent revival; and that its reach isn’t “systemic” in the way that big Wall Street banks and insurers are to the global financial system.” Yes, but? “There would be political gain in all this,” says Sean McAlinden, chief economist of the Center for Automotive Research in Ann Arbor, predicting an Obama win. “(The Democrats) could lose the entire congressional delegation in Ohio if they let GM and Chrysler die. A Democratic Congress and White House couldn’t possibly let them go down.” And just like that, the worst possible reasons for a merger (making GM “too big to fail”) are taking center stage. Awesome.

Edward Niedermeyer

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SCE to AUX on Oct 16, 2008

There is no actual need to preserve GM, other than its support network for existing product, which is sizable. The government will take this over, as well as its pension plan. It is ridiculous to believe GM-Mopar would be too big to fail. The Titanic was "unsinkable", too.

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Pariah on Oct 16, 2008
A Democratic Congress and White House couldn’t possibly let them go down.” And just like that, the worst possible reasons for a merger (making GM “too big to fail”) are taking center stage. For what it's worth, I'd say that political gain is one of the worst possible reasons for making anything happen.

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