Can you believe it? George W. Bush has saved the car industry. All those cheerleaders for instant bankruptcy, like Sen. Richard Shelby (R. Tenn.), can now go back to their drawing boards, along with the automakers.
Chrysler and GM got a transfusion of $13.4 billion in loans to tide them over to March, with the prospect of $4 billion more to come in February if necessary. The deal is pretty much the same as the earlier bailout bill Congress offered that last week went down to defeat. It essentially buys the industry time to come up with a viable (much debate on the meaning of that term) plan for reorganization.
A couple of interesting add-ons to note: the administration, according to the Washington Post, “has set as a target that the companies convince holders of up to two-thirds of their outstanding debt to accept stock in exchange, and that half of the payments into a union benefit fund be made in company stock.”
The idea is to get all major stakeholders to take a haircut, sharing both the present pain and the risks to come.
Cerberus Capital, the buyout firm that owns Chrysler, agreed “to hand over [its] equity in the company’s automotive operations to labor and creditors as part of its loan agreement with the U.S. government.” GM boss Rick Wagoner acknowledged that the road ahead would be tough but also called the federal loans a blueprint for the company’s second 100 years.
So who is going to oversee all this? There is talk that Secretary Hank Paulson will function as the new car czar. Hmm. This is the guy who opposed helping the automakers in the first place and refused for months to take any money out of the TARP funds—which they have done, finally, to support this bailout.
And for the moment, Mr. Bush seems to have given over his talk yesterday of an “orderly bankruptcy,” though that may well be down the road for the industry in any case. The President said he didn’t want to drop this financial bomb on the President-Elect in his first day in office. But it looks like Mr. Obama will have to defuse it anyway.
Can you think of a worse person than Hank Paulson to oversee the bailout?