Kick the Can
How fitting that in what may be its last major decision, the Bush administration economic team proved once again to be woefully inept. It's hard to imagine a worse outcome than the $17 billion bailout given to GM and Chrysler. It was proffered with virtually no compulsory requirement for the restructuring that is so necessary to the Detroit Three's long term viability. It's worse than the horrible House bill that died in the Senate, and it's decidedly inferior to the Corker plan that was shelved because of a single sticking point that ultimately could have been worked through.
As I've stated in previous posts, a pre-packaged Chapter 11 process is the best prescription for sustainability. The Corker plan, although imperfect, went a long way toward achieving the objectives of a bankruptcy filing. It was a deal worth doing, or at least pursuing further. One would have thought that once the Bush administration decided to pick up the ball, the Corker plan would have been the baseline for crafting a final agreement that addressed the major issues—substantial debt reduction, cost competitiveness with the foreign transplants, and equity ownership by the UAW. Bad assumption. Not only did they not keep and/or build upon the stakeholder (bond holders, UAW, management, etc.) concessions spelled out in the Corker plan, they gutted them completely. Instead of specific restructuring measures, they left us with vague targets—and non-binding ones at that. An absolute, unequivocal strikeout. Worse yet, the administration didn't even go down swinging.
How could they be so ham-fisted? My only explanation is that they've gotten caught between ideology and political expediency. For most, if not all of the second term, the administration seems to have softened its ideological zeal in an attempt to find more politically palatable solutions. Unfortunately, they've had nowhere near the deft touch or goodwill necessary to make such a strategy work. Whereas Obama looks pragmatic and forward-looking, Bush appears clumsy and misguided.
So, $17 billion has been handed out with no guarantee that the requisite tough decisions are going to be made to give the Detroit Three a fighting chance for success. Moreover, we've given money to a private company, Chrysler, that almost certainly is going to fail or be merged into GM or some other auto maker. Way to go George and Hank—one last terrible decision for posterity.
As I've stated in previous posts, a pre-packaged Chapter 11 process is the best prescription for sustainability. The Corker plan, although imperfect, went a long way toward achieving the objectives of a bankruptcy filing. It was a deal worth doing, or at least pursuing further. One would have thought that once the Bush administration decided to pick up the ball, the Corker plan would have been the baseline for crafting a final agreement that addressed the major issues—substantial debt reduction, cost competitiveness with the foreign transplants, and equity ownership by the UAW. Bad assumption. Not only did they not keep and/or build upon the stakeholder (bond holders, UAW, management, etc.) concessions spelled out in the Corker plan, they gutted them completely. Instead of specific restructuring measures, they left us with vague targets—and non-binding ones at that. An absolute, unequivocal strikeout. Worse yet, the administration didn't even go down swinging.
How could they be so ham-fisted? My only explanation is that they've gotten caught between ideology and political expediency. For most, if not all of the second term, the administration seems to have softened its ideological zeal in an attempt to find more politically palatable solutions. Unfortunately, they've had nowhere near the deft touch or goodwill necessary to make such a strategy work. Whereas Obama looks pragmatic and forward-looking, Bush appears clumsy and misguided.
So, $17 billion has been handed out with no guarantee that the requisite tough decisions are going to be made to give the Detroit Three a fighting chance for success. Moreover, we've given money to a private company, Chrysler, that almost certainly is going to fail or be merged into GM or some other auto maker. Way to go George and Hank—one last terrible decision for posterity.
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