Bailout right around the corner

Congress and the White House said that they are very close to agreeing on a deal to bail out the auto industry. The bailout is not exactly what the "big 3" have been asking for, but it is a start. Last week the CEO's of Ford, GM, and Chrysler went to Capital Hill asking for 34 billion dollars collectively in order to save their failing companies, some of which could go bankrupt as soon as the end of the month. Congress has agreed on a smaller bailout package of 15 billion dollars in order to give some short-term relief to GM and Chrysler. Ford is not in as bad of shape as GM and Chrysler, and have said that they do not need to take part in this bailout for the time being.

The 15 billion dollar bailout that Congress and the White House are working on would have several guidelines. For example, if GM and Chrysler get the loan, they would be forced to drop the lawsuits they have against states that have passed laws on emissions standards, such as California. Most importantly this bailout would appoint a "car czar" who would be in charge of monitoring the loan. This czar would have until March 31st to decide if GM and Chrysler have made enough progress, and if not, would have the authority to take back the loan. The "car czar" would also be able to meet with several stakeholders in the companies such as the auto unions, creditors, suppliers, dealers, and shareholders. The bill could be passed as early as the end of this week.

Some Congressmen, along with President-elect Barack Obama, have suggested that some of the "big 3" CEOs should step down from their positions, especially GM CEO Richard Wagoner. Obama said that these CEOs have been using a "head in the sand approach" to problems that have been years in the making. Obama has stated his support for giving a short-term bailout to the automakers, and said that Congress is doing a good job of "holding the auto industry's feet to the fire".

I personally do not think that this 15 billion dollar bailout is a good idea. It's like putting a bandaid over a cut that needs stitches. These 3 auto companies have serious problems that $15B won't solve, it will just "kick the can down the road". The "big 3" have been losing billions of dollars over the past few months because they have a failing business strategy, and they won't be successful until they understand the problems within them. On top of not being able to compete with foreign auto companies, the "big 3" are forced to give their unionized workers benefits that they cannot afford. Until these serious problems are solved, a mesely $15B is just a waste of tax payer's money. Perhaps it is time that two, or even all three of America's largest auto companies merge into one that is able to compete with Honda, Toyota, and other successful foreign auto companies.