So the choice is between dragging that pain out over the course of years (the bailout) or getting it out of the way in a horrible shock (Chapter 11). The latter would be much nastier in the short run, but I suspect better a year or so down the line...
With all due respect, this statement especially, and most of your reasoning here only comes close to making sense if you consider the auto industry in complete isolation without regard to the economic environment that has brought us to this point. While there's lots of talk in the media about the UAW and bad management decisions and so on (and remarkably little about brands and dealerships, which are a huge part of the problem), the reason they're in danger of going under now is that credit is nonexistent and auto sales across the industry are down more than 30%, neither of which are the result of any action by these companies. For Chapter 11 not to result in liquidation, it requires credit that would add up to a massive amount for companies of this size, at a time when the unavailability of much smaller levels of credit is the exact short-term problem they're asking for help in dealing with. And on the results side, it's not hyperbole to say that the effect of a "nasty, sharp contraction" of the country's largest industry with the current state of the economy could be the difference between a nasty recession and a worldwide depression. Even if you believe that's necessary for the auto industry, doing it a year or a year and a half from now would be infinitely better than doing it when the economy is already in its steepest decline in decades.
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Date: 2008-12-13 06:31 pm (UTC)With all due respect, this statement especially, and most of your reasoning here only comes close to making sense if you consider the auto industry in complete isolation without regard to the economic environment that has brought us to this point. While there's lots of talk in the media about the UAW and bad management decisions and so on (and remarkably little about brands and dealerships, which are a huge part of the problem), the reason they're in danger of going under now is that credit is nonexistent and auto sales across the industry are down more than 30%, neither of which are the result of any action by these companies. For Chapter 11 not to result in liquidation, it requires credit that would add up to a massive amount for companies of this size, at a time when the unavailability of much smaller levels of credit is the exact short-term problem they're asking for help in dealing with. And on the results side, it's not hyperbole to say that the effect of a "nasty, sharp contraction" of the country's largest industry with the current state of the economy could be the difference between a nasty recession and a worldwide depression. Even if you believe that's necessary for the auto industry, doing it a year or a year and a half from now would be infinitely better than doing it when the economy is already in its steepest decline in decades.