Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

The Essence of Why The Feds Are Bailing Out Detroit

Posted by: David Kiley on March 30, 2009

Lots of people are fed up with lending money to GM and Chrysler.

President Obama today made it pretty clear that Chrysler is pretty much at the end of the line in 30 days if it can’t bring banks holding its debt to their knees, as well as the union. On top of that, they have to strike an alliance deal with Fiat that the White House likes.

If it can’t manage all that, it’s Chapter 11. Good luck with all that.

Obama also made it clear that the White House was prepared to help GM either avoid bankruptcy, or create a new form of bankruptcy that insures that GM emrges in some sort of shape to compete again. GM’s bond holders, the union, and GM dealers will get the short end of that deal.

In the President’s very articulate statement about his plans today for GM and Chrysler was a passage that sums up exactly why GM in particular is worth saving.

Said Obama: “Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us. Well, we have reached the end of that road. And we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what’s necessary to solve them.

We cannot, we must not, and we will not let our auto industry simply vanish. This industry is, like no other, an emblem of the American spirit; a once and future symbol of America’s success. It is what helped build the middle class and sustained it throughout the 20th century. It is a source of deep pride for the generations of American workers whose hard work and imagination led to some of the finest cars the world has ever known. It is a pillar of our economy that has held up the dreams of millions of our people. But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies – and this industry – must ultimately stand on their own, not as wards of the state.

The world does not judge other countries on the steel they make, the toothpaste they produce or the soda they pedal. But a country’s auto industry is a calling card to the world. In China, Buick is huge. Who’d have thought?

The White House knows that beyond the jobs the industry supports, the U.S. would be a world laughing stock if it paid hundreds of billions to keep AIG afloat, but let GM and a good bit of the rest of the auto industry tumble for want of a few billion dollars.

The hard work is getting done. The quality is up at Ford and GM. The cars and trucks are much better. Nobody builds a pickup like Ford.

If there was any breakdown at all, it is that the Administration should have moved three months ago to push GM into a quickie Chapter 11 so it would come out clean. The problem was timing. Bush was on his way out. And Obama wasn’t in yet.

The automaker and tax-payers, though, can now see light at the end of the tunnel.

Follow “David Kiley” on Twitter

Reader Comments

Paul (Vw)

March 30, 2009 8:47 PM

>>> The automaker and tax-payers, though, can now see light at the end of the tunnel.

I'm afraid that the light you are seeing is an runaway freight train called the "Multi-Trillion Dollar Deficit Express"...and it's coming our way.

>>> The Administration should have moved three months ago to push GM into a quickie Chapter 11

Wow. I'm glad you said that.


March 30, 2009 10:14 PM

Now every business leader (entrepreneur, CEO, investor) will second guess himself about when some government official is going to intervene and ask for his head. The effect on innovation, execution and efficiency is going to be chilling.


April 1, 2009 12:10 PM

Michigan State earning it’s way to the Final Four also presents a study in contrasts with the likes of the auto executives who let the world, particularly the Japanese and Koreans, pass them by while they themselves crawled along in the slow lane, either devoid of innovative ideas or enacting them at a snail’s pace.

Had Michigan State lost, they’d be out, headed home, essentially fired. Their appearance at the big dance is a shining example of pure capitalism, survival of the fittest, at its best. The fact that it took 8 years and the government to get rid of Rick Wagoner as the head of GM is capitalism at its worst. Cronyism trumping creativity. Government intervention instead of free market forces running the show.

Michigan State is my sentimental favorite next weekend. It’d be nice to bring Motown’s residents a tiny sliver of joy in the midst of their troubles.

Post a comment



Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

BW Mall - Sponsored Links

Buy a link now!