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The "Car Czar" Needs A Big Hammer For Big 3

Wednesday, 10 Dec 2008 | 9:31 AM ET
Alan Mullaly, Robert Nardelli, and Rick Wagoner
AP
Alan Mullaly, Robert Nardelli, and Rick Wagoner

If Washington approves this $15 Billion bailout by the end of today or tomorrow (and yes, I think that will happen) the question will turn to who becomes the "Car Czar." It will be a presidential appointment and it will be crucial to determining if this auto bailout actually works.

Forget about who might be appointed. Odds are, it will not be someone who is well known by the public or in Detroit. That's fine. What matters is how much authority this person will have and, more importantly, that they exercise it.

The only way this bailout will work is if the Big 3 and their constituents (the UAW, bond holders, dealers, etc) know that "Car Czar" will throw them into bankruptcy if they don't show by March 31st their business' can be profitable. That means EVERY stake holder will have to take a cut. Nobody will like it, but it has to be done.

    • Vote on Big Three Bailout May Take Place Wednesday

The "Car Czar" needs to use the threat of throwing the Big 3 into bankruptcy if this bailout is going to work. He or she won't care about marketing or models. That's not what this first phase of restructuring is all about. They will care about labor contracts, dealer commitments, and whether bond holders are willing to take a hit. In short, this is all about cutting the cost structures at GM, Ford and Chrysler, and cutting them substantially.

The hard part of this bailout is just getting started.

It's a Deal for Now
The latest on the the $15B in emergency loans to the failing auto industry, with CNBC's Phil Lebeau

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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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