Bailout Detroit? NO!
The Next Bailout: Detroit
Excerpts:
Earlier this month, the Detroit Free Press reported that the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline. They figure they'll need $40 billion or so to ride out their current troubles until they reach the promised land of hybrids, the Chevy Volt, and, who knows, maybe even profits.
We've since heard that lobbyists for the car makers are taking their pitch for direct federal loans around Washington, with a goal of unveiling the plan after Labor Day -- conveniently in the frenzy of the fall election campaign.
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The plan is for the government to lend some $25 billion to auto makers in the first year at an interest rate of 4.5%, or about one-third what they're currently paying to borrow. What's more, the government would have the option of deferring any payment at all for up to five years. Meanwhile, Barack Obama recently signaled that he's open to federal money to help the auto makers invest in "renewable" technology, and Michigan Senator Debbie Stabenow and Mr. Dingell are supporting the $25 billion in loans to the not-so-Big Three as part of a second-round economic "stimulus."
Comment: Capitalism means some companies will fail!
Not only does capitalism allow companies to fail, the biggest problem the Detroit 3 have is that they're designing around regulations, not designing cars. Subsidizing them would only deepen their problems and disconnect with the consumer.
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