Bailout Watch 297: Is the Bailout a "Managed Bankruptcy" in Disguise?

Nothing like last minute preparations. Just as I waited until two hours before the first major snowstorm of the year to Blizzak my minivan, President Bush waited until the eleventh hour thirty to provide life-sustaining bailout bucks to Chrysler and GM. At first glance, the deal looks like something of a giveaway: here’s a $13.4b TARP under which you can shelter. Get back to us with the real plan in 90 days. I’m outahere. At second glance, it looks like the bailout is designed to fail. Our Torygraph friends across the pond get straight to the meat of the matter. “Bush’s Detroit bailout looks like a path to bankruptcy for General Motors and Chrysler. Billed as a way to give the two automakers breathing room, the deal actually imposes tough targets that must be hit in only three months. It’s likely the companies will fall short, which would force them to file for Chapter 11 protection. But that’s not necessarily bad – so long as they use the coming months to cut the deals with workers, creditors and others that they’ll need to get out of bankruptcy fast.”

Checking Automotive News’ [sub] bailout cheat sheet, those Brits ain’t kidding. The automakers must prove that they’re viable by March 31. “A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.” As if. Then there’s the requirement to “reduce debts by 2/3 via a debt for equity exchange.” I don’t think so. “Work rules that are competitive with transplant auto manufacturers by 12/31/09.” Yeah right. The UAW are so up for that. “Wages that are competitive with those of transplant auto manufacturers by 12/31/09.” Sure. Whatever you say.

The problem: even with these tough (not to say impossible targets), the loans have enough wiggle room to fit Jeff, Murray, Sam and Anthony and Captain Feathersword. “These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.”

To wit: twenty seconds after the deal was announced Michigan Democratic Rep. John Dingell rejected wage concessions on behalf of his unionized friends and family.

“We all want to see the Big 3 restructure and be competitive in the future, but it is irresponsible during a time of economic crisis for the White House to insist that workers take further wage cuts on top of the historic concessions they have already made.”

So, it all comes down to this: does anyone think this is anything but a stop on the way to bankruptcy station? Bush? The automakers? Bueller?