The merits of a “Detroit 3″ bailout has been debated at Donklephant ad nauseum. Since I cross post and already weighed in there, I won’t repeat those arguments here. But there is one point that seems to get lost in all the discussion and is repeated…

Since there is a risk that no creditor will lend money to GM which means it goes to liquidation, which is not at all a good choice. I dont believe taxpayers should bail out poor management decisions specially when taxpayers have no say in the future decisions being made. Job losses are the last thing we need since this means there is less money to spend for the rest of the economy to begin growing again.

Any money thrown at them is bad money. The only people wanting to bail them out have some financial stake in them in some direct or indirect way. Whether stock or receiving money from lobbyists……

I understand Schiff’s argument, and I thought I said that there was agreement with the main point that you highlighted. My question is, to put it simply, do we have to have bankruptcy to accomplish these goals?

Why don’t we, as part of the deal when we lend them the money, say the 25 Billion that’s been mentioned, demand to GM that they divest themselves. They would keep the flagship company’s; GMC, Chevy, Buick. and sell off Cadillac, Saturn, Hummer, for starters. The future of GM’s foreign cars makes such as Saab and the British car (?) are too complicated for me to weigh in on, but there’s plenty to go around. I believe they currently own 12 makes and many dozens of models.

GM has already begun the restructuring with the sale of Isuzu and Suzuki, and the new UAW contract they negotiated recently. It’s this economic crisis that has put them over the edge and to that end I think we should do something to help get them through the next 2 quarters, with the many stipulations attached to insure that good money isn’t thrown away with the bad.

Seems to me there’s substantial agreement that much reform is needed. One thing Schiff doesn’t address is this:

How much economic pain and social upheaval might the nation experience over the near term if the big 3 were let to entirely fail and big 3 production basically ground to a halt during whatever this transition period looked like?

Personally, I’m inclined to try to manage the reform transition to minimize transitional pain. For all of us, not the big 3. But if the big 3 and the UAW conspire to force a game of chicken, with every tweak and additional concession like pulling tooth and with some changes inevitably bartered away to the point of not being useful, then maybe I’m with Schiff.

Here’s the thing; the starting point in figuring this out is to construct a viable business model for these companies first, and then base reform on figuring how to get there as quickly as we can. The rest is static. If the big 3 stick with paying higher compensation and keep shouldering their legacy cost burden, there is simply no way on Earth they won’t fail sooner or later. Probably sooner.

I don’t get why some folks are so reflexively anti-bankruptcy. This system was designed to protect the workers of struggling companies at the expense of creditors and shareholders, and to try to establish a company on a revised and sustainable model freed from the flaws of ones established by existing disadvantageous contractual obligations.

If there’s one part of reforming the Big 3 that troubles me the most, it’s taxpayers poised to be stuck with the bill for the pensions and benefits of retired workers without any sort of renegotiation.

While I’m in favor of the overall point of your post, I don’t agree with Mr. Schiff’s analysis that the Big Three Auto’s are simply Dinosaurs, deserving of bancruptcy only. I submit that there must be a middle ground here where we can offer them a loan, with stipulations, that can help them through this period of economic crisis. We’re talking about only 4% of the bailout we’re doing for financial co’s and we’re talking about a manufacturing industry that has as much to do with the systemic health of our economy than any other business in this country.

It’s not just the numbers, it’s the idea that we can outsource everything and just make piles of money on “services and information-age” kinds of business. Which means, what, financial and dot.com company’s? How’s that workin out for ya these days. Mr. Schiff? How’s that workin out for your 401K retirement plans Mr. CW? Maybe you could spend a few of you golden years out in the sun and fresh air in a nice landscaping business for your service industry retirement plans?

I’m not saying that the Big Three shouldn’t be downsized, splitting them up would cause them to employ new management to a large extent. But not through bankruptcy, please. That would be a serious blow to their and to our hopes of ever again being the leaders of the free world economy. It sounds a little over the top, but it may be that important.