On Friday, the auto bailout was announced: General Motors and Chrysler will get up to $17.4 billion in short-term loans from the U.S. in return for deep concessions, as the Bush administration cited danger to the national economy. Treasury Secretary Hank Paulson reversed himself, asking for the second half of the TARP fund, some $350 billion. Many observers are asking: who gets bailed out next — and where does it end? Strategists told CNBC the bailout is going to make things worse; but one airline CEO sees a healthy Darwinian market process.
Auto Bailout: Downsizing vs Waste of Time & Money
Eric Thorne of Bryn Mawr Trust Wealth Management said the plan really does not change anything, and runs the risk of throwing good money into a bad business model. The auto industry is broken, he said, and he doesn't see what $18 billion is going to do to fix it. Invesco AIM's Fritz Meyer said terms of the loan are a forceful push in the right direction, with the endgame a very substantial downsizing.
2009 Will be Rough — But the Strong Survive
Former Continental Airlines chairman and CEO Gordon Bethune said businesses that focus on their products and integrity will beat their competitors, and the economy will come through 2009, even if "everybody's going to hurt." He said what people want is consistency, whether it's in a restaurant or an airline.
President's Auto Move: Appeasement Now, Disaster Later
Jack Bouroudjian of Capital Market Technologies said that rescue actions such as President Bush announced for the auto industry will not be regarded as market-friendly a few months from now.
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