November 7th, 2008
08:43 PM GMT
NEW YORK – General Motors laid it on the line Thursday. At the rate things are going, they do not have enough cash to operate next year.
They need government help and they need it now. Conservative estimates say Detroit's big three need between $25-50 billion immediately to keep their doors open.
The problem – not everyone is convinced it is a good idea to give them the cash.
Those in favor of the loan guarantees argue if you bailed out the likes of AIG, Fannie Mae and Freddie Mac and injected cash into the nation's banking system, then why not lend a helping hand to car-makers?
A study by The Center for Automotive Research has suggested as many as 2.5 million jobs would be lost if the big three U.S. auto companies fail.
Those layoffs would hit a U.S. economy that has already shed more than 1 million jobs in 2008.
Others also warn that many institutions own GM and Ford bonds and that letting them go under would create more turmoil in already fragile markets.
Those against giving Detroit cash complain it would be throwing good money at a broken industry.
They say these companies are too big. They promised too much to past workers. Earlier government loans have failed to spur real change.
Many wonder why this time would be any different. Maybe it is time to face the music.
Unlike the bank bailout which was designed to address credit and lending, this bailout is more about saving jobs.
Analysts argue that while big, the auto industry is not nearly as crucial as it once was. They say the money would be better spent retraining displaced workers and getting them different jobs.
And then there is the moral hazard issue. Where do we draw the line? If taxpayers bailout the car companies, who will be next? Airlines? Construction? There isn't enough money to bailout every company hurt by in this downturn.
What do you think? Is it fair to help some industries, but not others? How should lawmakers decide who survives and who fails? Would you buy a car from a company in bankruptcy?
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