Not A Disorderly Collapse, A Nice Orderly One
George Bush was asked about the auto industry rescue today during a speech at the American Enterprise Institute. He said that he hasn't made up his mind yet. But the signs are clear that he's looking at an "orderly" bankruptcy for the automakers.
The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.
White House press secretary Dana Perino said Thursday, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about." [...]
"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said during a speech and question-and-answer session at the American Enterprise Institute, a conservative Washington think tank. "These aren't normal circumstances. That's the problem."
So we'll force them to go bankrupt anyway, but it'll be done very nicely. That's not going to freak out consumers and keep them from purchasing an American car, worried about their warranties and service contracts.
This was floated the day before in a Bloomberg piece, but there it was assumed that bankruptcy would be forced by a "car czar" if the cash infusion didn't work out after March 31. This makes it much more sudden. By the way, that "car czar" looks to be Henry Paulson at this point. I don't think he'll show the same sympathy for blue-collar industry that he did for his financial buddies.
This is insane. Both GM and Ford are retooling themselves for the 21st century, and were on the road to profitability before the economic meltdown. Nobody can buy a car, that's the bottom line, it has nothing to do with what cars are being offered. The ripple effects have begun. Chrysler is shutting down all of its plants and GM is halting its Chevy Volt plant. You're talking about 3 million jobs at risk, and even an orderly bankruptcy is going to shake consumer confidence. It's exactly the wrong thing to do.
I know a lot of people thought that when Bush was left holding the bag after Senate negotiations produced no auto rescue, that the auto companies would end up with a better deal. Doesn't seem like it. Obama's transition could do a lot right now to save the industry and make his job a lot easier, but outside of the odd press release he's been strangely silent.
It's time for him to step in.