So, now the auto companies reportedly want even more money from the gum'mint -- now the bailout request is up to $34B. That's a curious strategy ... if at first you don't succeed, come back and ask for more.
Has this worked for anybody? I mean, when you were a kid and unsuccessfully asked your parents for a toy, did you come back and ask for a more expensive toy after you were told "no"?
Still... I'm not sure the economy can afford the estimated 6M+ job losses that would come in short order if the automakers are allowed to fail. So, that puts us all in the terrible position of having to hold our nose and do "something".
Now me, personally, I'd favor simply having the government step up and promise to provide whatver DIP (debtor-in-possession) funding the companies need if/when they go into bankruptcy. BUT ... there are those who say that consumers wouldn't buy from a auto company that had gone bankrupt, since they wouldn't trust that the warranty would be honored.
I guess that's where the comparisons to the airline industry starts to fall apart. It's true that airlines have been in and out of bankruptcy for decades and it doesn't seem to present much of a hurdle to people buying tickets. But here's the thing -- when you buy an airline ticket, your liability is clearly defined and it's short term (you know exactly how much you've spent, probably less than $1,000, and you know exactly how long you're at risk (until your trip is complete)). With a car, though, you're looking at a much larger expenditure and you never really know when you'll need that warranty to come through for you.
Maybe Paulson is going to announce that he's taking TARP money and establishing a new federal warranty guaranty program. After all, it wouldn't be the stupidest thing that man has done yet (more's the pity...).
Here's a final parting thought -- if the U.S. automakers are gasping now, what happens over the next few years as Chinese and Indian automakers start entering the U.S. market? Tata is coming ... Chery is coming ... and they're bringing friends.
Unless the auto companies have serious and far-reaching plans to fundamentally alter the way they do business, and that includes competing with still more low-cost competitors, this is just an inefficient means of assembling money into a nice, big pile and then torching it.
