Rumors of a structured bankruptcy were greatly exaggerated. President Bush has kicked the automaker bailout can down the road and decided to offer GM and Chrysler $17.4 billion in loans from the TARP fund. On the plus side, Bush’s conditions appear to be substantially the same as the plan Corker devised. They’ve got until the end of next year to bring their labor costs in line with “transplant” automakers.
On the double plus side – from a political standpoint – Obama and the new Congress will be forced to revisit the matter no later than February 2009.
The structure largely follows the pattern of legislation that failed in Congress last week in the Senate because of Republican opposition. In stepping in as he is, Bush risks angering conservatives in his party but the administration felt it had no choice given the fragile state of the economy
First off, the Senate plan failed not because of Republican opposition but rather the UAW opposition to an “arbitrary” date (12/31/09) by which GM and Chrysler were to have adjusted their labor costs. That and the four Democrats (Baucus, Lincoln, Reid, and Tester) who voted against it and four Democrats who didn’t vote at all (Biden, Kennedy, Kerry, and Wyden). Ten Republicans voted for the bill that failed to reach cloture by a 52-35 margin (Bond, Brownback, Collins, Dole, Domenici, Lugar, Snowe, Specter, Voinovitch, and Warner). Fifty-two plus eight equals cloture.
Secondly, Bush has already angered conservatives with his bailout shenanigans. What’s another $13.4 billion, right? At least this time he’s punted a politically unpopular football to President-Elect Obama and the Democrat-controlled Congress. The automakers won’t fail on his watch and his plan is essentially the Corker plan. It could have been worse.
The big loser is Ford. They’ve got $15 billion in the bank and stood to increase their market share if GM and Chrysler’s bankruptcy affected car buyers’ image of the companies. They’re also preparing to roll out the wildly-popular-in-Europe Fiesta in the US; whether or not a new subcompact proves popular with Americans remains to be seen. The European Fiesta’s diesel engine skirts sky-high gasoline taxes and the US version will be gas powered. Its success or failure will be a canary in the coal mine for the “green” auto designs sure to be foisted upon GM and Chrysler by Pelosi and Reid.
Bankruptcy would have been the best long-term solution for GM and Chrysler. Bush didn’t want their failures to be his legacy. We probably got the best band-aid solution, all things considered. Now it will be the Democrats who ultimately pay the political costs for future and continuing cash infusions to GM and Chrysler. Bush is just running out the clock. Faster please.
