The GM Bankruptcy Debate
The White House reiterated Monday that auto makers should receive funds
from the Department of Energy’s existing $25 billion loan program, but not an
additional $25 billion from the government’s financial-market rescue package. Below, how editorial pages and op-ed writers see a potential bailout.
Michael E. Levine writes in The Wall Street Journal: GM has about 7,000 dealers. Toyota has fewer than 1,500. Honda has about 1,000. … GM knows it needs fewer brands and dealers, but the dealers are protected from termination by state laws. This makes eliminating them and the brands they sell very expensive. … And therein lies the problem: The cost of terminating dealers is only a fraction of what it would cost to rebuild GM to become a company sized and marketed appropriately for its market share. Contracts would have to be bought out. The company would have to shed many of its fixed obligations. Some obligations will be impossible to cut by voluntary agreement. GM will run out of cash and out of time. … Federal law provides a way out of the web: reorganization under Chapter 11 of the bankruptcy code.
Eric Torbenson in the New York Post: Indeed, there are signs the auto bailout cake may already be baked, and this week is merely the frosting. … There’s some hope, though, that meaningful conditions will be hitched to the bailout. Detroit’s stubborn resistance to higher mileage standards might have to fall. Congress may limit salaries and bonuses and perhaps help guarantee some return on the money if, as many fear, the cash simply delays an inevitable slide to what would become a full-employment act for lawyers and restructuring experts - you might even think of it as a minor stimulus package for New York law firms.
Detroit News editorial: We worry that Congress may want to tie far more strings to the assistance it provides the automakers than it did to the money it handed the financial industry. … It’s also been suggested that the government will take an equity stake in the companies and demand seats on their boards. That would almost certainly restrict the ability of the automakers to shut plants and lay off workers. For all practical purposes, these moves would nationalize the auto industry and make its return to profitable, independent operation even more of a long shot. Presumably, an automotive “czar” could manage all of this meddling. If that’s the case, Detroit’s automakers might want to rethink whether it’s safer for them to be in the bankruptcy courts than beneath the oppressive wing of a federal overseer.
Detroit Free Press editorial: Frankly, there isn’t a responsible debate to be had over whether to help the auto industry, only about how and how much. … Ultimately, the question may be whether a proposed $25 billion in loans will be enough to get the automakers through to better times, which should arrive sometime in 2010 thanks to massive restructuring, cost cutting and promising new models due in showrooms about the time the national economy is starting to pick up.