Saturday, November 22, 2008
Auto Bailout
Congress has, so far, refused to bail out the Big Three automakers. Good. I hope they stick to their guns if the Big Three CEOs come back in their corporate jets in December.
Let's look at the situation of Detroit. We have companies with strong brands, who make good products (every car my family has owned as long as I've been alive was a US car), but are encumbered by union contracts that, while they might have made sense in the 50s and 60s, do not make sense today. Chapter 11 bankruptcy would allow them to renegotiate those contracts, while continuing to operate. Many firms continue to operate in bankruptcy, and emerge better able to compete. That's what Chapter 11-"reorganization"-bankruptcy is for, to allow financially failed companies to reorganize themselves into better performing companies.
Let's look at the situation of Detroit. We have companies with strong brands, who make good products (every car my family has owned as long as I've been alive was a US car), but are encumbered by union contracts that, while they might have made sense in the 50s and 60s, do not make sense today. Chapter 11 bankruptcy would allow them to renegotiate those contracts, while continuing to operate. Many firms continue to operate in bankruptcy, and emerge better able to compete. That's what Chapter 11-"reorganization"-bankruptcy is for, to allow financially failed companies to reorganize themselves into better performing companies.
