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After Big Three Bailout, Then What?

Bankruptcy anyway, that's what.

Do I really need to explain why?

  • The former Big Three are hemorrhaging cash, which an outside *deux ex machina* infusion will not stop.
  • They’ll have a larger debt load.
  • Strings attached to the bailout will include limits on executive compensation and government mandates to produce smaller, more efficient (or at least “greener”) cars.

-more-Since the Big Three lose money making smaller, more efficient cars, making more of them in itself won’t help profitability.

And since a big problem with the auto makers has been poor management, limits on executive compensation will only cause the best managers to leave for pastures which are perhaps less green, but more golden.

The basic problem with Detroit’s car makers is that they make cars in Detroit, under union contracts and thus union work rules. There is antagonism between union labor and the corporations which employ it, forestalling any attempt to lower costs, improve quality or increase efficiency.

Only bankruptcy followed by fundamental changes in the labor environment can help American automotive manufacturing.

See also the Academy.

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