Cafe de Mello

Probably for the wrong reasons, the Democrats in congress did the right thing on the auto industry bailout today. They kicked the ball back into the laps of the big three's executives, giving them 12 days to come up with plans to show how " the auto industry is held accountable and a plan for viability on how they go into the future," before any bailout money is allocated.

This is exactly the kind of planning that I called for yesterday as a precursor to any bailout. Unfortunately, any bailout funds will probably come out of the $25 billion all ready approved under the Fuel Efficiency Loan Program. The bailout funds, once repaid, would again be available for the loan program.

I still oppose this solution. If the big three needed the $25 billion loan to retool their factories to make more fuel-efficient hybrid cars, then that should be available in addition to the $25 billion they need to remain in operation. Remaining in operation while continuing to produce dinosaurs that nobody will want once gas prices rise again makes as little sense as the Chevrolet Malibu hybrid which only gets two MPG more than the regular Malibu (who came up with this loser?).

If the US big three are to survive, they may well need both an operational bailout, and retooling at the same time. Just pouring money into operations as usual makes little sense, but Congress has given then 12 days to develop plans that prove otherwise.

The demand by Democrats for the automakers to come back with workable plans may well have been designed to avoid blame for not passing a bailout if the worst happens and one or more of the companies go bankrupt or liquidates their assets (as GM has indicated it is prepared to do). Nevertheless, this is the right move. Without a workable plan to insure viability, the automakers would almost certainly continue on the path to extinction taking our $25 billion with them.

While waiting for the automakers to develop their plans, I recommend you take a look at Mark Fior's latest cartoon (here is the link). It does a great job of showing how the automakers got into this mess. You'll enjoy it.