Just to bring something into a little tighter focus on these discussions about what to do with the big three automakers and their capital issues.
Republicans who don't want to support any type of bail out for the automakers are basing it for the most part on pure capitalism, the idea being that if they fail they can reorganize in a more efficient pattern because of the market forces involved.
Great idea except that we have had so much mucking about in the market forces themselves that their ability to respond quickly in this situation would be seriously compromised; allowing the broader market to be dragged down with the automakers and perhaps not return in the foreseeable time no matter what sort of organizational restructuring they were doing.
Democrats who are supporting a bailout program are not doing it because they love the auto industry, they of course hate it, but what they do care about is the vast union contracts that are in place with these automobile companies.
One of the largest and most inefficient unions in the United States is United Auto Workers where they managed raise the cost of labor, retirement and health care so that the average hourly costs for a union plant is 60% higher than a nonunion shop for someone like Honda.
Pretty hard to stay competitive with those numbers.
The best suggestion probably that's been offered in our opinion is for the government not to simply hand out cash, no matter what the promises might be, to the automakers to prop up their industry but instead allow them to fall into the bankruptcy court but guarantee funds for the "debtor-in-possession" recovery.
Many large companies have went into bankruptcy to emerge leaner and stronger, however, they need to have sufficient capital to do the reorganization and still stay in business. Given the credit markets it is unlikely that any lenders would step forward to help the companies while trying to restructure in bankruptcy.
In the bankruptcy court, the union contracts would be rewritten which is why the Democrats are so resistant to that notion.
If the federal government would guarantee capital availability for the companies during bankruptcy so they might be able to reorganize and recover under the supervision of bankruptcy trustees and new boards it would keep them in business, prevent a large-scale drawdown of the manufacturing sectors and save jobs.
Just thinking out loud.
