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Editorial: Auto industry bailout needs to happen

Rob

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Auto industry bailout needs to happen

Bowling Green Daily News
Saturday, November 15, 2008 11:24 PM CST

Does a company or an industry ever become such an important component of our economy that the government shouldn’t allow it to fail?

A case in point is the big three automakers, General Motors, Ford and Chrysler.

All of them appear to be standing at the cliff peering over the edge.

General Motors claims it might not have enough cash to operate by year’s end. Ford and Chrysler are losing money hand over fist.

This has prompted calls by many in Congress for a bailout of the big three.

To this call for action, we offer a qualified yes.

Senate Democrats will take up a bill to extend $25 billion in emergency loans to the auto industry on Monday. We urge those from both sides of the aisle to pass this most important measure. It can’t wait.

The argument is that the failure of one or more of these companies could put in jeopardy some three million jobs in or connected to the auto industry.

Closer to home, Kentucky is home to GM, Ford, and Toyota plants. Dozens of satellite plants across our state such as Magna and Trace Die Cast in our city supply parts for the automakers.

Our Corvette plant has already scheduled interruptions in their production while Magna and other automotive suppliers have announced layoffs due to slumping auto sales.

These could be magnified many times by the failure of one or more of the big three with devastating impact on our local, state and national economy.

For these reasons we come down on the side of a conditional rescue package.

Any rescue must take the form of a loan that guarantees with the explicit understanding that these will be paid back.

This model worked well during the Chrysler bailout in 1979. The loans were repaid as Chrysler got back on its feet.

Congress should resist mandating that Ford, Chrysler, and GM build green cars as a condition for bailing them out. Let the consumers decide and trust them to make the right choice, which they will as soon as higher oil and gas prices return.

Any bailout should hold both auto executives and the United Auto Workers union accountable, the former for some bad decisions that cost market share and the latter for imposing labor costs, which have helped make the big three uncompetitive with foreign manufacturers.

There is talk of imposing rules for executive compensation like that imposed in some financial firms that got help. We suggest these rules could tie executive pay more closely to performance to include bonuses if the companies attain certain recovery benchmarks.

Any rescue plan also should contain some modification of union work rules that hamper the U.S. auto industries’ efficiency. The infamous job banks, a bone-headed idea put forward by management during contract negotiations a few years ago, is a good starting point.

A carefully crafted rescue plan with assurances that taxpayers would ultimately be made whole is a better alternative than watching our national, state and local economies continue to decline.
 
M

mswaim

Guest
Sorry folks; but executive compensation plans did not bring the auto industry to their knees.

And yes; Chrysler did receive bailout money in 1979 and they repaid it after re-structuring.

Correct me if I am wrong - but; they are one of the "Big Three" with their hand out AGAIN!!!!

And my favorite comment from the article:

Congress should resist mandating that Ford, Chrysler, and GM build green cars as a condition for bailing them out. Let the consumers decide and trust them to make the right choice, which they will as soon as higher oil and gas prices return.

In other words, let the free market determine their fate - which tells me the bailout is nothing more than a bandaid to keep them running in a "business as usual mode" until the money runs out. Afterall, consumers have spoken/are speaking; leading the industry to the point where they are today!

Just a quick footnote; numbers were published this morning showing the worst car of the year is the 2008 Dodge Avenger with no less than six recalls this year. Gotta love American/UAW build quality!!!!! Yea, lets' give them 25 more billion!!
 

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