In normal circumstances they should be allowed to fail. But this is not normal circumstances. Their bankruptcy would further destabilize a fragile economy.
The bailout does not mean no-string attached, of course. To some extent I can see a FDIC-type conservatorship or even a mediated merge (a la Bear Stearns to JPM) as a possibility. Heck, I have no problem using the bailout money to mediate a merger between GM and Toyota, although I can't imagine why Toyota would like to take on this piece of a headache. Or the fact that even Toyota itself is not insulated against the current economic malaise.
The important thing is that given the nation has seen job losses for each of the past 10 months, and that the Big 3 employs hundreds of thousands of people, the US economy would see a huge hit in unemployment in next few weeks were they to go under.
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5 years ago
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I wonder how the bailout is related to the oversea joint ventures by the BIG 3. Here is a link to the GM China: http://www.gmchina.com/english/corporate_info/company_inchina.html
GM used to go after the hydrogen fuel cell (no hydrogen supply chain in place) and losing to the hybrid electric cars from Toyota/Honda. Now they planning to roll out the 'Volt' in 2010. Even if the gas price goes back up to $4/gallon; I do not think the 'Volt' is not going to sell at the projected $30K to $40K price range. They should either think of a true electric car, instead of just another hybrid with a longer battery for a 40 miles range.
I am afraid the bailout money will go down the drain and varnished like the recent stock market.
My guess is the the differences in marginal cost of a hybrid engine and a conventional engine will continue to shrink as automakers continue to climb that learning curve: more efficient NiMH extraction etc.
whether the difference is sufficiently small such that hybrid engine becomes the standard rather than as an optional package I cannot say, but I think there is a non-trivial probability to that
Fro something like Volt, I wonder how much can the price come down if GM can take advantage of the economies of scale and learning.
My personal sense is that the use of bailout money for the Big 3 should be done in a very targeted sense. We all acknowledge that they have been behaving in a very short-sighted fashion: the question is that is it possible to change the incentive process for the better?
Japanese automakers are further ahead in hybrid technology because petroleum in Japan is more expensive than it is here. How do we optimize the incentive process in that fashion?
I am just frustrated lately.
Yes, we do need to help them out otherwise the domino and psychological effect will be hard to image.
Excuses for cheap gas is not the type of forward thinking we should expect from CEOs that make decisions affecting tens of thousands of employees.
There is always light at the end of the tunnel. How bright?
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