The Government Auto Bailout That's Becoming Swamped by Politics
Over the weekend, I blogged about the troubling political intervention into Chrysler's bankruptcy, where, pace established practice in such proceedings, disfavored secured creditors are being kicked to the end of the queue. (Thanks to Instapundit, among others, for really hammering this story, which is disturbing for about, oh, a trillion reasons.)
Here's a great Wash Post col by Eva Rodriguez about the longer-term but no less sinister implications of President Barack Obama's actions regarding the Big 2.5 automakers:
Which brings us to another disturbing aspect of the government's dealings: its unabashed and unwise attempts to tilt the scales in the unions' favor. The government proposed giving the United Auto Workers' retiree health fund a 55 percent equity stake in Chrysler—more than the combined stakes of Chrysler's merger partner, Fiat, or the other creditors that are owed roughly $7 billion. At GM, the plan is for the union to take a 39 percent slice—a rich reward for years of work rules, health care and pension deals that contributed mightily to the company's financial woes.
Obama has said he hopes to get out of the car business soon, and he has urged private investors to replace the government as the source of ongoing funds. But no executive in her right mind would take that gamble when it is clear that, in dealing with the government, private capital will always take a back seat to politically powerful entities. Bankruptcy—which everyone has dreaded until now—may prove an unlikely balm. Chrysler filed for Chapter 11 last week, and GM may be facing a similar fate. At least in this arena, long-established rules, and not political favoritism, will play a pivotal role in deciding who gets what. It will also bring some business discipline to decisions that will shape the companies—and, I hope, enable them to pay back every red cent I'm owed.
