Detroit Big Three

A Big Three Blunder In The Making

Written by Green Chip Stocks
Posted December 9, 2008 at 4:20PM

So it looks like Detroit's going to get a temporary lifeline. But early analysis of the potential plan doesn't look promising. Let's take a look at what's on the table right now...

  1. The U.S. taxpayers are going to shell out about $15 billion to get the automakers through early 2009. As a condition, the automakers will have to cut labor costs, restructure their debt and downsize. In theory, this doesn't sound out of the question for a bailout of this type. But upon further investigation, you will find that this $15 billion is being drawn from an existing program meant to help the automakers retool their factories to produce more fuel-efficient vehicles. As of now, we have heard no specifics regarding retooling factories to produce more fuel-efficient vehicles. Just a few "promises" to do so. For $15 billion, they need to do better than that.

  2. It is likely that a "car czar" will be federally appointed to supervise the restructuring plan. Again, in theory this doesn't sound too bad. But we're talking about leaving it up to Congress and the President to decide who will take on this job. Folks, these are the same people that patted themselves on the back after mandating a ridiculously weak corporate average fuel economy standard in an effort to placate the automakers and greenwash the public.

  3. The proposal also requires the companies to open their books to the government, including informing the overseer of any transaction of $25 million or more. How much do you want to bet that there will be a lot of transactions for $24.9 million? The overseer needs a staff to look over every single transaction. From million-dollar deals to snack machine orders at each plant.

And then there's the always-present, "what if" factor. What if they don't pull this off? What if management continue to deteriorate our once-mighty auto manufacturing muscle? Then what? Under the Democrat's proposal, if the automakers don't come up with a suitable restructuring plan by the end of March, the czar would have to submit his own blueprint to Congress for a government-mandated overhaul. And that $15 billion becomes nothing more than one more big fat loss for the taxpayer.

If there was ever a time for Congress to be stickler for detail - this is it!

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