***Bumped and Updated***
Just when I was beginning to resign myself to the fact that the auto industry would eventually get its bailout and its current failing business model would continue as usual, I am met with some great news. Thank goodness there’s a Republican with a backbone. Senator Richard Shelby is threatening to filibuster any auto bailout bill.
Sen. Carl Levin (D-Mich.), a staunch ally of the U.S. carmakers, and Shelby, who has emerged as the leading opponent of any aid package for the Big Three, sparred over the whether the American government should rescue U.S. automakers during an appearance on “Fox News Sunday.”
Levin said he was “confident” that Congress would consider a bailout bill for the auto industry, but stopped short of predicting whether it would pass. Democratic leaders in the House and Senate are considering a $15 billion “bridge loan” to help out the automakers.
“I think they’re very close to a deal, I think there will be a deal and that will happen in 24 hours,” Levin told host Chris Wallace. “Obviously, that’s a much more complicated question of whether the votes are there. What I’m confident of is that a bill will be introduced.”
But Shelby, who also voted against the $700 bailout bill for the financial industry, called it a “bridge loan to nowhere,” and said General Motors, Ford and Chrysler have to undergo a fundamental restructuring of their operations rather than look for federal help.
He also predicted auto industry executives would soon come back to Washington looking for more money, beyond any assistance they are given now.
“This is a down payment on many billions to come,” Shelby warned. “This is not something that happened overnight. This is 30 years in the making. These companies basically have failed or are failing. They probably need, according to some people, about 60 percent of the management to go, and about 40 percent downsize of the workers.”
Shelby also threatened a filibuster of any auto aid agreement, but was unsure whether he had the votes to sustain it.
He may not have enough votes to sustain a filibuster right now, but that could easily change with the vast majority of Americans opposing any auto industry bailout. People don’t want good money being thrown after bad, and the contracts that the US auto companies are strapped with right now are killing them. No amount of money from the US government can save them. They need to declare Chapter 11, get out of their contracts, and reorganize their companies.
Of course the CEO’s don’t want to do that because they’d lose their jobs. The UAW leadership don’t want bankruptcy because they’d lose their jobs. Yes, some line workers would lose their jobs as well, but they’ve been living pretty high on the hog with high hourly wages and super expensive health care packages. It’s time to come down to the reality the rest of us are living.
Update: Some commenters on this post are arguing that filing Chapter 11 would ruin the US auto industry, but this is totally wrong. Chapter 11 will benefit these companies in the long run. Besides, this is what Chapter 11 is for. Anyone who says Americans won’t buy cars from these companies because the warranties won’t be honored if they enter Chapter 11 don’t know what they’re talking about. If the Big 3 went into Chapter 11, all warranties would be priority claims and would be paid before almost anything else. The companies could run advertising campaigns to let their customers know that they can buy cars without any fear that their warranties wouldn’t be honored. Many companies entered Chapter 11 over the years and have come out on the other side significantly stronger and better run companies. Owens Corning and K-Mart are two companies that are vastly improved since their Chapter 11 filings.
Besides, if these companies are in such bad shape that even Chapter 11 can’t help them, then they should go the way of the buggy whip as far as I’m concerned. Under no circumstances should the American people be forced to support companies that have such awful business models that they can’t sustain themselves. Since nature abhors a vacuum, I’m certain an enterprising and intelligent businessman will see the huge market available, take the risk, and start his own American car company, which means he will be required to hire American workers. The American auto industry can begin anew, free from the entanglements that are killing the American automakers now. Just imagine the kinds of exciting and cutting edge cars that could be produced with fresh thinking, an innovative business model, and the most productive work force in the world.