Is a Detroit bailout a bridge loan or a black hole?
As the Big Three CEOs return to Congress to make their case for a taxpayer bailout of their companies, industry spokesman Senator Carl Levin, D-Mich stated:
“I believe the industry will make a compelling case for bridge loans that will allow the companies to return to firm financial footing, and they will lay out plans for continued restructuring and advanced technology products, all of which was underway prior to the global economic collapse.”
If this was truly just a case of a bridge loan to get the automakers past the global recession we are in, I don’t think there would be nearly as much opposition. The problem is, that despite the rationalization made by Senator Levin, the automakers had been destined for trouble long before the economic crisis. The economic downturn was merely the straw that broke the Big Three’s back.
A “bridge loan” in theory would get the automakers back to where they were before the economy collapsed… but that isn’t necessarily a good thing. They need to get to where Toyota and Honda are, and it is hard to imagine them doing that with the same management, labor contracts, and mindset that has allowed them to get into their current crisis.
Whether a bailout is necessary to protect our entire economy is another question, but justifying it as a way to get the automakers to continue “restructuring” that was “underway prior to the global economic collapse” seems to ignore the depth of their problems that existed prior to the economic downturn.
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