A New Plan...will it work?

written by:
Andy Watkins
Editor
BusinessDetroit.com

The big three have now presented their business plans for recovery to Congress and will be in front of the Senators and House of Represenatives answering some more detailed questions about their plans. Even though Congress and most of the public view this as a bailout it actually is not a bailout. This request is a bridge loan to cover normal outstanding expenses and without this bridge loan each of these automakers would not be able to operate at the same way and would require major cut backs and layoffs of its employees and product lines.

If the credit markets wouldn't have gone South in recent months then the automakers would have just restructured the debt and refinanced their existing loans through their normal pathways, but due to the downturn and the credit markets being frozen that option was closed. The U.S. Government is the only group large enough to provide the cash they all need to keep operations moving.

Many would argue that the free markets suggest that the strong survive and the weak should fail, well I agree with that concept, except in this situation the credit markets are not acting as normal in the free market, so to use that arguement wouldn't be matching the situation as apples to apples. The automotive companies have been weakened by slower sales and increasing overhead, but they wouldn't be on the verge of closing their doors if the credit markets were still operating at full strength again.

So this local business person supports the Bridge Loan to the automakers as long as the request and plans are real. If the automakers are playing a shell game with our tax dollars and crying wolf then they should fail, but if they are telling the whole truth and nothing but the truth then we need to give them the bridge loan not only to save jobs, but to speed up the recovery of our nations economy.