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

Robert Farago
by Robert Farago
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?

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  • Porschespeed Porschespeed on Dec 20, 2008

    In disguise. And by disguise I mean Rosie O'D dressed up as Rosie O'D....

  • 50merc 50merc on Dec 20, 2008

    GS650G: "Tell the UAW to pound sand and lock the doors." It'd be interesting to see what that would lead to. In the 30's the UAW achieved its first great victory by occupying GM factories and making fortresses of them. It was illegal, but with the Wagner Act the union had the whip hand. No bad consequences for the union. Today, we have to wonder: have things changed so much a "sit-in" wouldn't work?

  • Old Scold As a Marylander, I got those plates assigned to me when I purchased my car in 2016, 4 years after the so-called anniversary. I figured they were using up NOS, and it never occurred to me to check out the URL. I still don't care. It's a stupid issue, but I have my tag number memorized should I need it.
  • Hpycamper I drive a car with automatic braking and have nothing good to say about it. It has activated going around corners on mountain roads when the hillside is close to the road, when lawn sprinklers turned on and sprayed the car, and driving past cars on the shoulder that are making right turns. Luckily these phantom brake activations have not caused a wreck. The systems are just too dumb.
  • SCE to AUX How long until that $90k yields a profit for my grandchildren?
  • Ajla I do wonder what the legacy of the Alpha Camaro will be. It was higher performing than the Zeta but lacks the pop culture imprinting of that gen or the earlier F-body. And somehow it managed to be less comfortable than the Zeta. I guess it depends if this is really the last traditional Camaro.
  • SCE to AUX I'd admire it at the car cruise, but $20k gets you halfway to a new truck.