Thursday, December 04, 2008
They're Back! (The Big Three) on a Game Show; no slumdog millionaires welcome
Today, The Washington Times levels things against the “Big 3” auto makers with an editorial “The Case for Chapter 11”. The link is here. The editorial particularly focuses on the concern that car buyers will not have warranties honored or would not be able to find repair replacement parts. The editorial says that this problem has been handled with bankruptcies in the past, partly by structuring the warranty and parts businesses outside of bankruptcy, and by guaranteeing customer claims. Even so, it is hard to believe that consumers, in practice, will be willing to buy cars from a manufacturer in Chapter 11. We would want to know where bond holders (directly, or as parts of mutual funds) would stand in being repaid.
CSPAN has been televising the Senate hearings today, and they do sound a bit more cordial. Speakers have said that a collapse of the car companies would drive a lot of minority-owned businesses out.
We’re seeing Car acceptance companies filing to become commercial banks to accept deposits and get FDIC protection.
Visitors may want to read the perspective of the Cato Institute, by Daniel Ikenson, “Big Three Ask for Money – Again” here. Cato calls the hearings a national game show” called “To Bail Out or Not to Bail Out.” "They're Back", all right, having humbled themselves by driving their own hybrids from Detroit to Washington (even through Ohio, for goodness sake) in order to "pay their dues."
Just a couple years ago, dealers were hiring trainees to sell cars and claiming they could earn $100000 a year if they were extroverted enough! Now, the Big 3 CEOs hardly seem as admirable as the "Slumdog Millionaire."
Update: Dec. 5
John Stossel and Ben Stein debated the car bailout on Larry King Live tonight. Stein said, you don't worry about the morality of the patient when on life support. Stossel said, you let them go under because the assets are still there; someone else buys the pieces and restarts the business and hires the workers back, cheaper, but with better management.