Emotions would suggest yes - but practically would it help? I think not in the way the government is suggesting. The bailout should be done through indirect methods to stimulate demand for automobiles and reduce the auto companies cost of carrying until the economy picks up. For example tax credits on all auto and auto component purchases could be part of the option. The Auto companies have very high costs per unit of production and capital infusion will not help - maybe a loan for working capital for 12 months could be thought of - but what happens should they not be able to improve cash flows? Which they cant if they dont cut costs . So here's what needs to be done in my opinion:
a) Provide working capital loans to all three based on a realistic projection for 12 months
b) Provide tax credits for the auto components industry
c) Force the big three to improve emission standards
d) Force them to move out of gas gazzling inefficient products over a staggered time line
e) Get the unions to the table and make them part of the discussions
f) Set up a structure to take out their pension liabilities over the next five years and take them off the balance sheet
g) Put a salary freeze on the companies for the next three years and reward only through bonuses based on agreed performance measures.
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