Chundles

I'm not opposed to the US Government stepping in to prevent the collapse of the auto industry, but like I've said before, it must be under preconditions that will enable them to emerge with the long-term viability they lack today. Unfortunately for the American Taxpayers, and those whose livelihood depends on a strong US auto industry, the loans announced by President Bush today will not do anything to ensure that the endemic problems of the industry are solved. It's a bandaid when major surgery is needed. Here are the preconditions reported by the New York Times:

The loan deal requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers in the United States.

and

To gain access to the loans, G.M. and Chrysler must agree to a range of concessions, including limits on executive pay and the elimination of private corporate jets.

That's it! Nothing about innovation, nothing about cooperation and collaboration with the stronger Japanese auto-makers, nothing about cars with high fuel efficiency, nothing about forced retirements for veterans past their prime. Nothing. Just some financial rejiggering.

All these preconditions do is extend the financial runways of the borrowers (likely to be GM and Chrysler). They do nothing to force this industry to change and adapt to the modern, global, marketplace. That means they're still going to fail, so we shouldn't waste our money.

To get access to these funds, Treasury Secretary Henry Paulson must submit a request to Congress, who can then reject or approve such request. Congress should show some foresight and courage by rejecting the request from Paulson, and responding with a list of acceptable preconditions that will result in a US auto industry that's viable for the long-term. If they won't agree to those terms, let them fail.