A Bridge Loan to Nowhere? Posted by: McQ
on Saturday, December 06, 2008
That's what the Wall Street Journal calls it and adds, "Congress and business 'viability' rarely mix."
As the WSJ notes, this isn't about a loan to allow the Big 3 to get back on their feet, it's a plan to essentially takeover the domestic auto industry and direct it from Congress.
Look at their plans and listen to the Congressional rhetoric for heaven sake:
All three restructuring plans are heavy on promises to build the "green" cars that a Democratic Congress wants built. GM promises 15 hybrid models by 2012 and 37 miles per gallon on average for its cars. Chrysler commits to putting flex-fuel engines, which can run on ethanol or gasoline, in half of its cars. Ford promises to save 16 billion gallons of gas by using "advanced technology" and to invest $14 billion to improve fuel efficiency.
All three CEOs also drove to Washington in hybrid vehicles as penance for their private-jet flights back in November. This bit of political obeisance was supposed to show that they'd gotten religion both on their perks and their carbon footprint. But it may not have been enough. One Congresswoman wanted to know why they couldn't hit a 50-mpg fuel-economy target by 2015. Another asked whether, maybe, they weren't selling enough cars because everyone in America was waiting with baited breath for the coming revolution in fuel economy.
After Barney Frank was done roughing up the CEOs, he hustled them out to hear from David Friedman of Union of Concerned Scientists and Jeffrey Sachs of the Earth Institute. Mr. Friedman warned the Members not to give one inch on fuel-economy standards and not to relax the environmental strings attached to the $25 billion Congress has already made available to the car companies.
You get the picture. If there was ever any question whether Congress actually wants to "save" Detroit, this week dispelled it. This is not a bailout that Congress is debating. It is a federal takeover. We don't mean that in the sense that the feds will own the companies on paper, although that can't be ruled out. What Congress wants to own is their business plan, and Detroit seems prepared to oblige.
I couldn't agree more. Left out of this plan, of course, are the Big 3's foreign competitors who won't be constrained or beholden to anyone when this ends and will most likely be in a position to actually read and react to market demand while domestic automakers are reacting to Congressional mandates.
Which brings us to the second point about the apparent loan deal that is about to be announced. The amount of money being discussed, 15 to 17 billion, won't do anything but keep the Big 3 solvent until Barack Obama takes office and the new Congress is sworn in. Then the real bailout - with more strings than a Spanish guitar - will be trotted out and the desperate automakers will be left with no choice but to accept the rules, regulations and mandates imposed.
Of course once Congress has a vested interest in those car makers, it will be unlikely to allow them to go under since they will represent a pet project many of them have been wanting for decades. And we'll get to see, up close, why "Congress and business 'viability' rarely mix" is a true statement.