I woke up this morning to the radio airing the news that the auto bailout has passed. I'm glad a lot of people won't be losing their jobs but I think we're only delaying the inevitable. The $17.4 billion bailout has provisions that require, among other things, the automakers to "prove they can restructure sufficiently" or those loans would be called back. My question is, can the automakers really turn it around? It's like a gambling addict who just needs some seed money to win back all the losses his accumulated over the years. Chances are, it's just not going to happen. And what if they don't sufficiently restructure? Would they really care if the loans are called back? They'd be in the same position they were before the bailout except now with three months of salaries paid. And actually, I don't think Congress would have the guts to actually do it. The old cry of "we can't let the US auto industry fail" will be heard again.
If the government really wanted to make a difference, they should have asked for the resignation of all top level executives from any company that asked for a loan. The way it's setup now, these automakers will come back to Congress in March and either ask for more money or time to prove they are restructuring (probably both). Why would anyone give money to a group of people who have a history of failure? This is in stark contrast to a company like Toyota who hasn't had an annual corporate loss in 71 years (they expect to end the current fiscal year with a loss). In fact their profits in 2007 alone were $14.9 billion - almost the same size as the current bailout. With a cushion like that, who needs a handout?