Projo Cars Blog

It is hard to imagine that Congress is going to leave the Detroit 3 auto makers out in the cold by denying them some form of bailout.

Automotive News makes no bones about the need for such a measure in this week's edition with a rare front page editorial signed by Publisher and Editor in Chief Keith Crain and Associate Publisher and Editorial Director Peter Brown.

Titled simply 'The High Cost of GM's death,' the editorial argues that if General Motors were forced into declaring Chapter 11 restructuring, it would result in "a collapse in sales and a spiral into a Chapter 7 liquidation."

It goes on to argue that GM's collapse could take down Ford and Chrysler, with dealerships closing in every county in America.

This may be hyperbole. The liquidation of the biggest player in any industry would surely imply more room for others to fill the gap in the market.

But there is no question that should GM fail the cost, in terms of unemployment and health payments, to the government - ie we the taxpayers - is likely to be far greater than the $25 billion the Detroit 3 are currently seeking.

The editorial accepts that the management in Detroit bares much of the responsibility, especially in terms of being tougher with the UAW and embracing the challenge of higher fuel efficiency standards rather than lobbying against them.

Indeed, it argues that GM's top management may need to go.

But it argues that the bottom line is that "In two to four months, GM will run out of cash and turn out the lights. Only government money can prevent that. Every other alternative is fantasy."

Peter C.T. Elsworth

 Tags  auto industry bailout Chrysler ford General Motors

Comments

Car mechanic mark said:

A twist on the failure of the big three I do not see being discussed. I work for a large government fleet as a truck mechanic. Our fleet is made up of GMC, Chevrolet, Dodge and Ford vehicles. We are Scheduled to replace 2200 vehicles in 09 using tax payer funds. If the big 3 goes under we would spend the taxpayer money on foreign vehicles. Pumping money directly into foreign economies. Government agencies buy American as a rule of thumb. But not if there is nothing American to buy.

Link | November 29, 2008 4:52 PM
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