General Motors and Chrysler this week said they were perilously close to collapse and pleaded with the federal government to shell out an additional $21 billion, on top of the $17.4 billion in bailout funds they’ve already received. In return for a new federal infusion, the two companies offered drastic cuts in operations and concessions from their unions, creditors, and suppliers. GM said it would lay off an additional 47,000 workers, close five plants, and reduce the number of its brands from eight to four. Chrysler said it would lay off 3,000 workers and discontinue three models, including the PT Cruiser.
President Obama last week decided against appointing a “car czar” to oversee the industry, opting instead to form a task force within the White House. He named Ron Bloom, a Wall Street advisor to unions in troubled industries, as his point man in negotiations with the automakers. “More will be required from everyone involved,” said Obama spokesman Robert Gibbs—“creditors, suppliers, dealers, labor, and auto executives themselves.”
This is what a bailout should look like, said the Detroit Free Press in an editorial. The plans presented by GM and Chrysler “are far more specific than those offered by the Wall Street bailout recipients.” Certainly their plans are preferable to costly, messy bankruptcy filings in the teeth of a severe recession.
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The Obama administration deserves credit for breaking “the logjam among auto companies, their union, and their creditors,” said The Washington Post. Still, the White House and Detroit have to do more to assure Americans that they’re not throwing good money after bad. The outright collapse of one or more automakers would obviously be a huge blow to our fragile economy. “But we can think of something worse: propping them up through an endless series of government bailouts, with no prospect of long-term viability.”
An auto bailout may be necessary, said Robert Reich in Talkingpointsmemo.com, but so far it’s way out of whack. “Why pay the Big Three billions of taxpayer dollars to stay afloat when, even after being bailed out, they cut tens of thousands of American jobs, slash wages, and shrink their American operations?” Any bailout should be focused not just on the companies but on helping “American autoworkers keep their jobs or get new ones.”
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