Tuesday, December 16, 2008

Hey, Big 3, If You Let Government Get Into Bed With You, You'll Never Get It Out Again.

I'm holding back a little in the title of this post. I'm addressing it to the Big 3 automakers, now seeking alms from the taxpayer. What I mean to say is that if you let the government in your bed, you will get screwed (still a little more polite than the word I'm actually thinking of). Todd Zywycki has an op-ed in today's Wall Street Journal in which he get it exactly right about why the automakers should prefer Chapter 11 not government "help".
Those Washington politicians who repeat the mantra that "bankruptcy is not an option" probably do so because they want to use free taxpayer money to bribe Detroit into manufacturing the green cars favored by Nancy Pelosi and Harry Reid, rather than those cars American consumers want to buy. A Chapter 11 filing would remove these politicians' leverage, [my emphasis] thus explaining their desperation to avoid a bankruptcy.
I agree with this, except that I don't think it's going to be a bribe. It's going to be naked coercion. Once you get Harry and Nancy dictating the kinds of cars they'll build, Maxine Waters dictating which dealers they may or may not close, etc., it's only a matter of time before the Big 3 really do collapse entirely. The Big 3, at least GM and Chrysler, should file now, before they completely lose control of their destinies. Chapter 11 gives the companies the opportunity to come up with a reorganization plan first and if management is smart (not demonstrated thus far) they'll take this opportunity before it's too late.
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