Automakers just got a $25 billion loan from Uncle Sam, but now here GM and Chrysler are again, hat in hand, asking for another $10 billion to facilitate their merger. But the “deal is a lemon,” writes Steven Pearlstein in the Washington Post. Yes, the economy would suffer if GM and Chrysler fail, but even after a bailout the companies would have to shrink 25% and slash around 40,000 jobs.
The irony of saving the Big Three from bankruptcy is that bankruptcy is exactly what they need, he argues. A bankruptcy court could reduce their oversized retiree health obligations, help them close dealerships, and impose reasonable pay strictures on the UAW. Without such restructuring, a bailout “would simply be throwing good money after bad.” Michigan’s lawmakers must “stop shilling for Wall Street creditors,” and force the industry to face some painful truths.