Bailouts Bad Idea: Sink or Swim is Recipe for Healthy Corporations

Automakers Are Lining Up Aid, But Just Don't Call It a Bailout

By Jeffrey H. Birnbaum and Sholnn Freeman
Washington Post Staff Writers
Sunday, December 4, 2005; Page A01

Troubled U.S. automakers and their allies on Capitol Hill are seeking billions of dollars in aid from the federal government ranging from health coverage for their workers to extra tax write-offs for themselves.

They're also asking for one rhetorical favor: Please don't call the requests a bailout.

"I don't view it as a bailout," Sen. Carl M. Levin (D-Mich.) said.

"We're not looking for a bailout," agreed William C. Ford Jr., chairman of Ford Motor Co.

The "B" word has been taboo ever since Chrysler Corp., faced with impending insolvency, sought and narrowly won $1.5 billion in loan guarantees from Washington in 1979 and 1980. The company eventually borrowed $1.2 billion and repaid the loans in 1983, seven years earlier than was required.

Nonetheless, the notion of the American taxpayer saving a company with a large and quick fix has pretty much gone out of style and has not been repeated since, with the exception of loan guarantees to airlines after 9/11. Even though General Motors Corp. and its rival Ford Motor now face serious financial straits, both are studiously avoiding public condemnation by spreading their aid requests widely among many types of government policies.

Taken together, however, the components of their wish list would cost tens of billions -- far more than Chrysler ever dared to seek.

With pleadings that large, breaking the requests into smaller pieces makes a great deal of legislative sense, and industry and labor leaders hope that several relief packages could begin to move in Congress next year. The outlook is uncertain, especially given the size of the federal budget deficit, but auto industry representatives said they were optimistic that at least some of their proposals would succeed.

Throwing good money after bad is never a good idea. The Chrysler bailout in the 80's was questionable, but it was sought after after by new management. Lee Iacocca may have been a flim-flam man in a lot of ways but he did have a vision for the company and since then they have been one of the most innovative auto-manufacturers in the world. Carl Levin would have us spend whatever it took to keep these dinosaurs in business. I might favor some limited bailout provided these corporations restructured and cleared house. Before money goes in, new management needs to be in place. Although it would be a blow to the overall economy, none of these corporations would destroy the economy if it went bankrupt. In a nation of 100 million employed, the loss of 100 thousand jobs would be painful but tolerable.

Full Story: Socialism or Capitalism Choose Now

What do you think?

To leave your opinion click on the word "COMMENT(S)" below