Editorial: Bailout Watch 270: A Final Plea for Sanity

The last hope. We’re making a final appeal. Senate Republicans, led by Jim Shelby (R-AL) and Bob Corker (R-TN), need to send the proposed loan program to Detroit into the dustbin of history. As constructed, the legislation represents a waste of taxpayer money. It’s a pretend piece: A bridge to nowhere. The bill’s based on the false hopes of a new car czar, entrusted to negotiate a restructuring outside of court for General Motors and Chrysler. That won’t happen-– and shouldn’t happen. Only the party of Lincoln can stop this foolishness now.

TTAC does not want Detroit to fail. (Ok, Chrysler should fail – unless its rich Daddy wants to continue their foolishness.) There are lots of good, honest people in the auto industry who have been sold out by decades of GM, Ford, and Chrysler mismanagement. Executive leadership working under a bubble of opaque glass, ignorant to the changes in the real world of auto sales.

As legions of American consumers departed for Japanese, German, and Korean iron, these Detroit managers found comfort in placing blame squarely outside of their control: foreign currency, unfair trade, health care, etc. In truth, their decisions and indecision lead to vehicles that failed to deliver the goods. Had it not been for the ascent of truck-based vehicles and cheap gas in the 1990s, Detroit would have been dead years ago.

Today, again. Rick Wagoner and his GM minions continue to claim that they were victims of circumstance, sandbagged by lousy economic conditions caused by Wall Street’s disastrous mortgage orgy. Nothing could be further from the truth. Any student of Detroit has known for years-– and as repeatedly documented by TTAC– that GM and its cohorts have been headed for disaster for decades. The economic crisis is simply the straw that broke the camel’s back.

Against a backdrop of soaring unemployment, Democrats in Congress decided it could not adjourn without doing something, anything, for Detroit. And so it’s created an even bigger economic disaster, lying in state for the new President. The current President doesn’t want to leave office as “the President who killed Detroit.” So it’s up to the final bastion of rationale thinking– the Senate Republicans– to kill this deeply flawed, hugely wasteful piece of legislation.

We propose something different. And simpler. Something that might satisfy all of the political demands and protect American taxpayers.

Just give GM six billion dollars and Chrysler four billion dollars. No strings attached, other than a requirement for collateral to back it up. If there’s no equity at Chrysler (there isn’t), the automaker’s private equity owners Cerberus should step up. By their own testimony, Ford doesn’t need money now. So don’t give them any.

Don’t try to craft any solution involving government terms and conditions beyond collateral. No warrants, no car czar, no “green car” requirements. And get rid of that stupid “no jet” clause. How the heck can you run a multi-national company without one or two?

Under this plan, Congress will force The Big 2.8-– and their creditors-– to craft their own reorganization now, rather than waiting for the car czar to propose one. Better, it’s all accomplished outside of court, without any political overtones. Best, it sets an immediate time limit on a resolution.

The money provided today will run out-– that’s a guaranteed fact. And then it will become Obama’s problem to decide if he wants to continue funding corporate welfare. But by then we’ll know the truth about any restructuring progress. Whether Rick Wagoner and Bob Nardelli are the men they say they are.

In the end, a straightforward, no-strings-attached loan will prove with all finality that there can be no restructuring of GM outside of court. We highly doubt that GM really understands the depth of its problems; it will refuse to take the painful but necessary medicine unless dragged kicking and screaming into bankruptcy court.It’s now owned by its creditors and the UAW, not its shareholders. Just hand them the keys.

Chrysler cannot function as an automaker going forward. Cerberus’ plan for its baby to become merely a distributor for other products-– while keeping the financing-– didn’t work. Time for liquidation.

We hope Senators Shelby and Corker read this. They understand that giving these companies funding today under the proposed legislation will become an endless money pit, with no restructuring accomplished under government purview. Not one creditor will accede to the haircuts required without compensation– from the taxpayers, not the companies. We’ll hear future requests, with half-baked restructuring plans, none of which will work.

Instead, just give these companies a lifeline today without fuss or muss, and let them make their own way out of the wilderness if they can.

And if they do come back with a restructuring program that truly works, then Congress and the new POTUS can craft a loan program with necessary government oversight. But why try and figure that out now? Someone needs to teach Congress how to negotiate. We’ve done our best.