Well, so much for the hope that the Bush Administration would force the Big Three auto companies into Chapter 11 reorganization in exchange for receiving federal funds.
WASHINGTON — President Bush on Friday announced $13.4 billion in emergency loans to prevent the collapse of General Motors and Chrysler, and another $4 billion available for the hobbled automakers in February with the entire bailout conditioned on the companies undertaking sweeping reorganization plans to show that they can return to profitability.
Mr. Bush made his announcement a week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.
Mr. Bush, in a televised speech before the opening of the markets, said that under other circumstances he would have let the companies fail, as punishment for their own bad business decisions. But given the economic downturn, he said the government had no choice but to step in.
“These are not ordinary circumstances, in the midst of a financial crisis and a recession allowing the US auto industry to collapse is not a responsible action,” Mr. Bush said.
Mr. Bush also said that bankruptcy was not a workable alternative for the troubled automakers. “Chapter 11 is unlikely to work for the American automakers at this time,” he said, noting that consumers would be unlikely to purchase cars from a bankrupt manufacturer.
The loan deal also requires the companies to quickly reduce their debt obligations by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States.
Without the hammer of a Bankruptcy Judge presiding over things, though, it’s unlikely that the Big Three are going to get the consent they need to make the sweeping changes necessary to save themselves. Where’s the authority to eliminate brands, dealers, and overly-generous union benefit plans ?
Nowhere, that’s where.
And so, the Bush Administration rides out of town having once again screwed the American taxpayer.