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December 12, 2008

White House Considering Bailing Out The Automakers

The predictable White House Statement.

It is disappointing that while appropriate and effective legislation to assist and restructure troubled automakers received majority support in both houses, Congress nevertheless failed to pass final legislation. The approach in that legislation provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds go only to firms whose stakeholders were prepared to make the difficult decisions to become viable, competitive firms in the future.

Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary including use of the TARP program -- to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.

While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions, and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable.

Last night's efforts failed when the UAW refused to agree to wage parity between US automakers and non-union foreign manufactures with plants here in the US.

I wonder how the lower paid but profitable non-union workers at Honda and Toyota plants here in the US feel about their taxes going to prop up their overpaid and bankrupt competitors.

If the White House uses TARP money to bridge the Big Rapidly Shrinking 3 to early next year and there are no meaningful strings attached, then the UAW's game of chicken will have paid off. It's not like the new Congress, with less Republicans, is going to impose the kind of conditions like Bob Corker and other Senate Republicans were working on yesterday.


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posted by DrewM. at 11:07 AM

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