Monday, November 17, 2008

Prediction: GM, Ford, Chrysler Get Bailout, Then Go Bankrupt As Well

Do I really need to explain why?

  • The former Big Three are hemorrhaging cash, which an infusion will not stop.
  • They'll have a larger debt load.
  • Strings attached to the bailout will include limits on executive compensation and, possibly, government mandates to produce smaller, more efficient cars.

Since the Big Three lose money making smaller, more efficient cars, making more of them in itself won't help profitability. Since a big problem with the automakers has been poor management, limits on executive compensation will only cause the best managers to leave for more pastures which are perhaps less green, but more golden.

Only bankruptcy followed by fundamental changes in the labor environment can help American automotive manufacturing.

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