We have seen a lot of posturing, but we havenít heard a lot of sense in the debate over whether the government should spend even more to bail out Detroitís foundering automakers.
Senator Richard Shelby, a Republican of Alabama, is wrong when he says that the troubles of the Big Three are ďnot a national problem.Ē The Detroit companies support nearly 250,000 workers and more than a million retirees and dependents, as well as millions of workers at part makers and dealerships. A messy bankruptcy filing by any of the big car companies, in the midst of this recession, would likely cost the government and the economy more than trying to keep them afloat.
At the same time, Congressional Democrats and President-elect Barack Obama, who are pushing for many billions worth of emergency aid for the nationís least-competent carmakers, must ensure that tough conditions are attached to any rescue package. If not, the money will surely be wasted.
This goes beyond firing top management, forbidding the payment of dividends to stockholders and putting limits on executive pay ó all necessary steps. The government should insist on a complete restructuring of any company it pours billions of public funds into.
All three car companies have been hamstrung by the legacy costs of providing pensions and health care to hundreds of thousands of retirees. But Detroitís problems are mostly of its own making. More...