Editorial: Bailout Watch 258: Now What? (Part Two)
If there is one man responsible for GM’s successful semi-suckle on Uncle Sam’s teat, it’s Steve Harris. I reckon GM’s PR mastermind moved the Congressional bailout hearings from the beginning of the week to the end. Tuesday’s catastrophic new vehicle sales numbers highlighted the fact that SOMETHING HAD TO BE DONE. Friday’s unemployment stats added the critical word NOW. Once Congress convinced itself that it could convince the American public that really bad shit was about to go down, the bailout was a done deal. In truth, it’s just the start. Harris knows it, you know it, and the American people know it.
A recent CNNMoney poll revealed an enormous gap between voters who don’t support the Detroit bailout (61 percent) and those who don’t support the Detroit bailout and think it won’t help the U.S. economy anyway (70 percent). In this latter assessment, for once, common sense prevailed. If $700b to the smartest minds on Wall Street didn’t stop the recession, why would handing over less than a tenth of that to a troika of failed companies have a salutatory effect?
I choose my words carefully. Despite The Big 2.8 and our (their?) elected representative’s concerted and sustained effort to make Motown a synonym for domestic automobile manufacture, the average Jorge and Juanita knows the difference between Chrysler, Ford and GM and “the American automobile industry.” They understand that they have alternatives. Hell, they like the alternatives. They bought the alternatives. And no one’s threatening to take those cars away. Which frees them to ask the obvious, inescapable question: “where’s MY bailout?”
Considering the source of Motown’s collective “bridge loan,” this IS their bailout. And if taxpayers aren’t happy about the tens of billions of dollars heading for The Big 2.8’s coffers now, just wait until March, when Detroit’s begging bowl brigade descends on DC for Round Three. The chance of them getting a second bite at the multi-billion dollar proverbial cherry grows dimmer by the day.
In their search for survival at any cost, Motown’s mavens have maneuvered themselves into a lose – lose situation.
For one thing, either the economy will be in a severe recession/depression by March or it won’t. If it is… see? The Detroit bailout didn’t work. Fairly or not, if the industry’s prospects still suck, Congress will have little luck trying to sell the electorate on the idea that the bailout was a “success” that deserves repetition. If Detroit’s prospects suck even more than before– a downgrade that occurred during the two-week bailout-begging interregnum– the pro-bailout position will grow even less tenable.
At that point, by March, bailout fatigue will be terminal. Voters will realize that this Detroit bailout thing was never about “us.” It was always about THEM. And sorry guys, you had your go. Sink or swim. We’re floundering in our own sea of troubles.
If, however, the U.S. economy is NOT any worse than it is now, the argument underpinning the bailout ALSO loses justification. Once again, the feds bailed someone out and… nothing happened. American voters aren’t like OCD sufferers constantly checking to make sure the gas is off. The fact that a cataclysmic event didn’t occur isn’t proof that Uncle Sam was right to devote his time and our money to making sure it didn’t happen. Triple negative aside, what the Hell was THAT all about? I’m not paying for THAT again!
If voters are P.O.ed that Wall Street “squandered” their $700b, how do you think they’ll feel about Chrysler, Ford and GM’s “progress” over the next two months? Let’s face it: The Big 2.8’s sales will continue to fall. Their share of the shrinking U.S. market will continue to erode. Union concessions, debt-for-equity swaps and (God forbid) management changes will do nothing to staunch the flow of red ink, or remove the big fat “L” tattooed on Motown’s collective forehead. No matter what they do or don’t do, this bailout brands them as losers; now and into the future.
To counteract this cancerous concept, GM PR will spend the next couple of months spinning their [same old] turnaround story. Ford will continue to trot-out their entirely disingenuous “What me worry?” insouciance. Chrysler? Fuhgeddaboutit. They’re already dead. Come March, they’ll just be deaderer. Maybe even officially.
There’s your wild card. On one hand, the remaining domestics could point to a Chrysler collapse as a cautionary tale. Fork over more money or stick a fork in us. Your choice. On the other hand, Chrysler’s extinction could provide a compelling argument for a GM (and thus Ford) Chapter 11 reorganization. See what happens when you try to bailout a lost cause? Abandon all hope of a non-C11 turnaround ye who enter these congressional halls.
And that’s how this will go down. Next week’s bailout billions will be the only pre-C11 money for Chrysler, Ford and GM. Anything after this will be a debtor-in-possession deal. Bankruptcy isn’t just the right thing for these automakers; it’s the only thing. Even Steve Harris knows that. And if he doesn’t, God help Detroit.
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