Bailout Watch 461: More Money, Same Threats

The news that the Presidential Task Force on Autos (PTFOA) has decided to “loan” Chrysler and GM more money arrived well ahead of the March 31 (Tuesday) deadline. No less a personage than the president confirmed that Uncle Sam would turn a deaf ear to the 60 percent plus of America voters who oppose Motown Bailout III (Don’t forget the DOE tour). The announcement removed any possibility that GM bondholders and/or the unions would satisfy the previous loan’s conditions for a major debt for equity swap, or that GM would get its brands sorted out. To counter-spin this wholesale lack of “progress,” Bailout III will claim that new, piano-wire like “strings” are attached. Such as?

All I can find: GM bondholders and/or the unions will have to satisfy those same unsatisfied debt for equity/health care swaps. Or else. Here it is, via The New York Times.

Administration officials have said the bailout of the automakers is at a turning point, and the task force would intensify its oversight of G.M. and Chrysler until talks with the union and bondholders reached a conclusion.

Those officials also said the administration had no intention of nationalizing the auto companies or taking direct control of their managements.

Nor, apparently, calling the loans, putting Chrysler into Chapter 7, putting GM into Chapter 11, or removing current management and providing debtor-in-possession financing. Which is, was and will be the only sensible strategy or credible threat. Well, at least it was a credible threat until the Obama admin let it ride. Which they wouldn’t do again, would they? Meanwhile, here’s the thing . . .

The longer the feds keep throwing multi-billion dollar bags on the automakers’ IV pole, the less viable Chrysler and GM become. The process accelerates their product plan chaos (e.g., on-again, off-again GM products, the yes/no/maybe Chrysler Fiat hook-up); the constant erosion of command and control structure (employee cutback take their toll); and the brain damage caused by hitting their metaphorical heads against the same old walls (e.g., unions, debt, dealers, brands, products, inventory, marketing, technology). It has a cumulative effect.

As the Brits say, there will be tears at bedtime. Chrysler and GM will be worse off after federal life support than they would have been had they’d faced reality and filed. A C7/C11 would have forced the radical changes that the PTFOA seek. The damage to Chrysler and GM’s reputation would have been less severe.

Meanwhile, the new new federal loans aren’t a bridge to nowhere. They’re a road to nowhere paved in gold. Our gold.