Source: stck.xchng Photo: lusi
The emergency auto bailout bill passed by the House appears to be going nowhere in the Senate as the Senate Republicans are insisting that UAW give further concessions. Key demands being that the wages and benefits at Big 3 be cut to the levels that Honda and Toyota pay at their US plants
I am glad that the Senate Republicans are taking this line. As long as the labor costs remain high, the US auto makers will not be able to operate profitably and will very likely come back to the congress for further bailouts. The Big 3 needs to undergo sever restructuring, which is only possible through a bankruptcy process. If bankruptcy option is too unpalatable to the industry than it is critical that these concessions are negotiated with UAW right now
There is just too much moral hazard involved in this bailout for autos. The least that the industry can do is to commit to taking tough actions
By and by, why are we even discussing bailing out Chrysler? It is owned by Cereberus a private equity group. Why don’t we insist that Cereberus invest some more money into Chrysler to stabilize the company? Why should the taxpayers be responsible to protect ’so-called’ sophisticated investor’s investments?
Like I said, this whole deal is steeped in moral hazard
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