Fool Us Twice, Shame On Us

I mentioned back in December that the bailout for automakers felt like a bad idea. Specifically, I asked the obvious question: What if the bailout doesn't work? The obvious answer back then was that the car companies would STILL go bankrupt, and we (the tax payers) would be $14 billion dollars poorer.

Well, sure enough, here we are in late March 2009, and GM and Chrysler are turning their pockets inside out again, saying that the $14 billion we gave them didn't quite do the job. They want more money, and Obama is going to give it to them. Oh, he's doing his best to look all stern and grumpy while he's using the nation's overdrawn checkbook to write Detroit another check with nine or ten zeros on it. But he'll write the check, make no mistake about it.

And guess what. The automakers will still go bankrupt. But the question is, will that be the end of it? It'll go one of two ways, I think.

Option 1 has automakers filing for some kind of high-speed bankruptcy as a condition of their getting more bail out money. They'll file for bankruptcy, wiping out much of their debt (thereby screwing over their suppliers and vendors, not to mention the US tax payers). They'll take a crack at retooling their labor contracts and restructuring their pension and benefit positions. And they'll get billions more in guaranteed loans from the Obama administration. With all of this, the car companies will reemerge, ready to do business again. And guess what! They will still fail, and they will be back yet again to ask for even more money.

Option 2 has has automakers getting billions in additional money from the government before they take the step of filing for bankruptcy. They'll get the money, burn through it, and then still go belly up, wiping out the money owed from the first bailout ($14 billion) AND however much they get this second go-round. All creditors will get screwed, attempts will be made at restructuring, and they will reemerge just as screwed up as they were before. And guess what! They will still fail, and they will be back to ask for even more money.

There is, of course, a third option, but it is an option no one seems willing to take. This third option has GM and Chrysler being allowed to fail outright. We as tax payers resignedly write off the $14 billion in lost bailout money as a lesson well-learned, and we refuse to play the game any more. The automakers go belly up. And instead of allowing this privately-held company to screw over countless vendors and suppliers (and tax payers), we amke sure that their assets are used to pay all outstanding debts.

I used to think that having those big companies fail would be an unthinkable disaster for the country. I now see that there are far worse things.

Can GM and Chrysler emerge from such a liquidation and still competitively build cars? Probably not. So be it.