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The Wheels Are Off
Stop Pouring Money Into GM and Chrysler

By Richard Cohen
Tuesday, March 31, 2009

When I was around 12, I was a paperboy for the now-defunct Long Island Press. One Thursday, when the paper was heavy with shopping inserts, a storm hit, and my papers and I wound up in a puddle. My customers would not pay for a paper not delivered, and the Press insisted on billing for those I had received. The CFO of my company, a.k.a. my father, took one look at my books and pronounced me bankrupt. He would say the same thing about General Motors and Chrysler.

This is not a complicated concept. GM and Chrysler do not have the money to pay their bills. They are, in fact, deeply in debt and have almost depleted the $17.4 billion the federal government -- which is to say, you and I -- lent them only last December. Now they are asking for billions of dollars more -- $16.6 billion for GM and $5 billion for Chrysler. Life itself instructs that it will not end there.

The Obama administration has warned both companies that it may let them sink into bankruptcy. In the meantime, though, more money is probably on the way -- along with some cosmetic management changes. Rick Wagoner, GM's chief executive of blessed memory, has already been pushed out, and the company's directors are heading in the same direction. Still, somebody -- God only knows who -- is supposed to come up with yet another plan to save GM and do it in 60 days. Maybe they'll outsource it.

It beats me whether either company can be saved. Both have proved themselves to be singularly incompetent over the years, but lately, some brain waves have been detected. GM, in particular, has been developing energy-efficient cars and, according to the administration's auto task force, could survive if it further cuts its expenses. Chrysler, in contrast, can survive only if it more or less merges with Fiat -- a company once renowned for poor management. See: Anything can happen.

Here I must introduce Tim Geithner, the hapless-cum-brilliant secretary of the Treasury. He not only proves that conventional wisdom is a half-truth but that in certain matters, it is best to be first. Geithner got confirmed by the Senate even though he had failed to pay some taxes; Tom Daschle later had to withdraw his Cabinet nomination for a similar offense. As always, timing is everything.

So it is with this auto industry bailout. It comes too late. It comes after the government has substantially taken over some big banks and that financial house of horrors called AIG. Taxpayers are now in hock for trillions of dollars, some of it incurred to bail out the thieves and rascals who bought $1,000 bottles of Cristal champagne at New York clubs or put the GDP of small nations up their noses. With the various stimulus packages, we are adding $9.3 trillion in debt over the next 10 years.

The auto industry is not only late to the table, it comes with a bad rep. We may not understand what AIG did -- what's a credit-default swap, anyway? -- but we sure as hell know what GM did: It made a lot of lousy cars. So did Ford and Chrysler. They made cars with utter contempt for the customer. The industry at one time even opposed seat belts and air bags, and it designed cars that were not safe. I know things have changed, but I remember. I remember.

Finally, we have yet another application of the Geithner Rule. Recall his confused explanations of how he learned of those AIG bonuses. Those of us who cannot find our keys in the morning ought to have nothing but sympathy for a man who is now running a large part of the American economy. Of course, he might not have been paying attention. He can't pay attention to everything.

This is where bankruptcy comes in. It slows things down. It's a mechanism. It's a process. It takes things step by step. It has been designed for situations such as the one the auto manufacturers face. It puts things into court and out of the political arena, where both the United Auto Workers and the Big Three can play the lobbying game. Bankruptcy can save the industry.

Is there a downside? Sure. No one knows whether anyone will buy the cars of a bankrupt company. (The government could guarantee the warranties.) Will it further hurt the economy? Probably, but who really knows? But bankruptcy acknowledges a reality -- GM and Chrysler are broke. I wish them luck -- but no more of my money.

cohenr@washpost.com

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