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Behind The Wheel

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Aug.25

2:04 PM ET

Monday, 25 Aug 2008

The Big 3 DO Need Federal Help

Posted By:Phil LeBeau

Sectors:Oil and Gas | Technology | Automobiles and Parts

Companies:Toyota Motor Corporation | General Motors Corp | Honda Motor Company, Ltd. | Ford Motor Company

The Big Three
Let's get some things straight. As I write this blog, I'm fully aware some of you will scoff at the idea of the federal government offering billions of dollars to the Big 3 in restructuring loans. I know some of you will say, "Don't give them a bail out. Let'em go under."

With that in mind, there's a long and compelling list of reasons why the federal government should give the Big 3 access to this money.

- Without it, there is a very real likelihood one of the Big 3 goes under. And take it from someone who has covered many a bankruptcy in the airline industry: bankruptcy ain't pretty. You think someone will plunk down $25,000 for a car or truck from a bankrupt automaker? Nope.

- This is not a bailout. Yes, that word will be thrown around, but this is different. The capital markets have essentially shut down. Where are these guys to go to raise the mony they need to re-tool themselves?

- The Big 3 have been restructuring agressively on the own and still more is needed. These guys haven't been sitting around doing nothing. Had I not seen first hand how dramatically they have cut costs in recent years, I'd be against offering them help. But in this case, Detroit's been trying to clean up its act for some time.

- If Detroit's automakers crater, the implications for the broader economy will be significant. The auto industry, which includes parts suppliers, dealers, service technicians, etc., has perhaps the broadest impact on the economy of almost industry. Washington lets part of that collapse, the ripple will be felt.

There you have it. I know some of you will call me a "socialist-loving, Big 3 sympathizing idiot." But from where I stand, offering federal loans to automakers is the smartest move Washington could make right now.
_____________________________________
The Big 3:

- Ford Motor [F Loading... () ]