Car trouble

Mr. Michigan, Mitt Romney, has a really interesting op-ed in today's New York Times, saying that taxpayers should not offer a bailout package to the Detroit-based U.S. automakers.

"If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

"Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course ...

"Detroit needs a turnaround, not a check."

Not only is Romney a former Michigan governor, who you might think beholden to automaker interests, but his father once ran American Motors.

His idea, shared by many others, is that bankruptcy could be good for the automakers -- a chance to overhaul and reemerge as companies retooled for the modern market.

The biggest risk I've heard explained, though, is that the label of "bankruptcy" may destroy the business. Consider whether consumers would buy any GM or Ford vehicles if they have concerns about whether the companies will be around in a couple years. Warranties could be voided, parts suppliers may no longer be around when repairs are needed.

Tough call. Here's another interesting take.

1 comment:

Adam said...

I thought
was the best read on why to save the big 3 (mainly because the credit companies normally use in bankruptcy to get back on their feet is nonexistent now and that if the big 3 should end up failing it would probably cost 1 in 10 Americans their jobs because of the dominos that would follow). But hey, we could see what happens like we did with Lehman Bros.! Enjoying the blog, keep it up!