A Missed Opportunity

There is apparently a deal in the works to help out the Detroit portion of the U.S. auto industry. It reportedly involves removing the strings on a $25 billion facility that was originally intended to fund the development of more enviornmentally friendly cars. It’s too bad that we’re ending up with a political “split the baby” solution.

This may be premature but let’s assume that whatever money comes their way from this honey pot, it comes with few strings attached. That’s unfortunate because Congress did have a real opportunity to fundamentally attack the base problems with the industry and probably insure its survival albeit with a smaller footprint. The companies were clearly desperate enough to accept just about anything so it would have been nice to see our legislators seize the day.

Talk of a prepackaged bankruptcy with the government providing debtor in possession financing and other needed backstops had been making the rounds. There was great merit to the idea since it would have afforded the opportunity to divorce the proceedings from politics and allow hard decisions to be enforced. Unions, dealers, management, shareholders and bond holders would have all seen a haircut imposed in order to create a viable entity that could emerge with a good chance of survival. An alternative solution of some sort of government oversight board functioning in somewhat the same capacity was a second though less attractive alternative.

Letting one or more of the three fail was never an option. Politically, it just wasn’t about to happen and, realistically, the economy is in no shape to absorb the shock such a failure would impose. Therefore, something did have to be done, no matter how unappealing the three may be. Politicians, however, rarely take the bold step and it appears that they are holding true to form once again.

This truly is an opportunity missed. The auto companies will inevitably be back for more. The next time, though, they will be dealing with an administration and Congress with green on their mind. The money then will come with strings but they won’t be strings that can be pulled to rationalize the industry. Rather they will be strings that make it dance to the environmental tune.

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