THE FRUSTRATING part about auto executives’ presumptuous attitude toward a taxpayer bailout is that they are probably right — they are too big to fail.
But the chiefs of General Motors, Chrysler and Ford didn’t help their cause by arriving in Washington in private jets to ask Congress for a handout. The move typified the industry’s cluelessness.
Lawmakers didn’t promise to rescue Detroit, but they didn’t rule out a bailout, either. Congressional leaders said they might return to Washington on Dec. 8 to consider $25 billion in emergency aid, provided the automakers come up with a workable plan to become competitive.
Many taxpayers don’t want their money to reward Detroit’s perennial habits of corporate greed, union demands and shortsightedness. Taxpayers’ reluctance is justified. But here’s the problem: a collapse of the domestic auto industry will cost the public much more than a short-term bailout.
A liquidation of GM could cost the federal government as much as $200 billion in unemployment benefits and other aid to such states as Michigan, Indiana and Ohio.
Federal, state and local governments would lose tens of billions in tax revenue. Job losses from the failure of one automaker could total 2.5 million, a shock that this slumping economy can’t absorb.
Lending the Big Three $25 billion now would be worth the expense, if it staves off those dire forecasts. The question is how to ensure, to the extent possible, that a bailout helps to get the companies back on their feet permanently?
President-elect Barack Obama is said to be considering a so-called “prepackaged” bankruptcy, which would allow the automakers to restructure quickly. Under this option, the companies would go into court with financing, a business plan, and concessions from unions and suppliers.
If taxpayer dollars are going to be committed to this bailout, Washington needs to obtain ironclad guarantees from the automakers that they will change their ways.