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Big Three Bailout: What It Will 'Cost' The Automakers

Thursday, 13 Nov 2008 | 9:57 AM ET
Big 3 Bailout
CNBC.com
Big 3 Bailout

An old friend of mine always used to say, "There's no such thing as a free lunch." That's true. And now the Big 3 are about to find out the price they'll pay for a government bailout. Yes, whether you like it or not (and I have heard from many of you that you don't like the idea of a bailout) Washington will lend Detroit the money they need to survive this crisis.

But it will come at a price.

• Equity Stake in the auto companies?
Absolutely. Makes it easier to sell to angry constituents if Congress can say the U.S. will profit from a rebound in the auto stocks.

• Fuel efficiency benchmarks?
Yes. The devil will be in the details, but Congress wants concrete benchmarks the Big 3 will have to meet in terms of fuel efficiency.

• Car Czar?
Maybe. Someone who will hold the Big 3 accountable to making the reforms that will be mandated. This position only works if the person appointed truly understands the auto industry and has the authority to come down on Detroit in a year or two if the Big 3 fall short of their commitment.

• Executives fired?
I doubt that will happen, nor do I think it should. Oh I know some of you will e-mail and say, "Hey, the Treasury department should boot these guys and bring in others to run these companies."

Rick Wagoner, Alan Mulally and Bob Nardelli have been cutting and pushing their companies to restructure. This crisis has been brought on by the perfect storm of circumstances, not by recklessness by the suits in Detroit. Are they guilty of perhaps not moving faster? Yes. Those are mistakes, but not criminal actions.

Next week Congress will meet and the debate over how much to give Detroit and what strings will be attached will heat up. Ultimately it will be worked out, but at a price. As my friend Detroit Mike told me this morning, "Dude, this is one messed up situation Washington needs to fix." You're right Mike. So very right.

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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