Chrysler is headed for bankruptcy after all (and it looks like GM is right behind them). This is exactly what Republicans like Mitt Romney were saying to do, way back in November. Had we followed their advice, the taxpayers would have saved billions!
Why didn’t we just let the automakers go bankrupt then? The Democrats in Congress would not have gone for it. They would never allow the UAW to suffer its deserved fate in bankruptcy court. President Bush would not do it because he was worried about his legacy and lacking true conservative principles, fell for phony bailout arguments.
The phony arguments were that if the automakers went bankrupt, thousands of jobs would have been lost and thus threaten to pushing the economy into depression. Well, since Obama has become president, thousands of jobs have been lost (h/t to Emptysuit) and it did not push us over the edge. The other bogus argument was that no one would buy a car from a bankrupt automaker because of warranty concerns. Obama "solved" that problem.
But did the warranty problem really need solving? People have been buying used cars without warranties forever. If people are willing to take a risk buying a used car without a warranty, who would not risk buying a brand new car without a warranty? Especially, if the price was slashed enough. How about a brand new 300M at 50% off with no warranty, worth the risk ain’t it?
Now we have Chrysler headed to bankruptcy court with the government by its side. The government will no doubt exert all of its influence to make sure it ends up with a huge share in the new company and that the UAW comes out far better than they would have on their own. But is this what we the people really want?
Does the American people want to be shareholders in Chrysler? Do we want such a large company run by our government? Will Americans even by the cars that are produced by the new Chrysler? None of these questions would have to asked if we just let the free market run its course.
My predictions are that, we are going to get stuck with UAW legacy costs, private shareholders will get screwed, the new Chrysler is going to be constantly subsidized one way or another and the new Chrysler is going to produce crummy little Green Cars.
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2 comments:
Clifton well said. I blogged about this very subject in November. I too feel like we have wasted billions when a fast tracked bankruptcy would have been the solution but the Congress insisted that the automotive industry was too big to fail. Then B-Rock stepped in to run the industry. What has changed from November to May? I guess they were ok to fail now. Failure was the best option. Look at Delta Airlines, Federated Department Stores and others that have emerged from bankruptcy stronger.
What a waste of money! This could have been done in December or January and these companies could already be on their way to success.
Ron B:
The difference between November and May is that the government paid out billions to buy themselves control of these companies. It is backdoor nationalizion!
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