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Bailout Backlash

Enter the phrase “auto bailout” into a Google search and more than 5 million results appear. It’s true that “bailout” has entered our temporary lexicon, along with the euphemistically termed “bridge loans” and “relief packages,” and as the Big Three’s CEOs go back to Washington, hats in hand, we wonder who’s next in line and where these loans will end.
 
At the time of this writing, more than 60 percent of Americans oppose the auto industry relief package proposal, according to a CNN Money poll. As people tighten their purse strings at home, they expect the same of their government, which is where the sentiment seems headed.

Add to this the fact that these automakers have realized they need more than the extra $25 billion they originally sought, and we have a meter that keeps running, and a public that's basically fed up.
 
Yes, domestic car manufacturers made some tactical errors along the way, but the automakers’ worst problem is they’re in a “wrong time, wrong place” scenario. Were GM to go through bankruptcy five years ago, it could regain footing and get on its feet. In today’s frozen credit market, a company in Chapter 11 could dissolve into Chapter 7 pretty quickly, which would mean liquidation, and up to a million direct and indirect jobs lost when the dust settles.
 
So however tired we are of hearing about yet another large corporation that needs help, it’s important to remember that the auto industry is itself a staple of the American economy.
 
Another disadvantage the car companies face is what I would refer to as the “bailout backlash,” which means the public at large and Congress are wary (and weary) of bailout talk. There was not this much scrutiny placed on bankers when the first package was introduced. Did we care what AIG’s leaders drove or flew in to get to D.C.? Now, extra caution is thrown at this situation in which the Big Three “bigs” find themselves in the crosshairs.
 
The auto industry will pay for its own mistakes, along with the misdeeds of the financial and insurance sectors. Too much leniency was given at first, and the backlash is upon us.
 
The fact remains that GM globally outsells its competition. And although OEMs represent competition, a lot more damage could be done if we passively watch these titans fall.
 
During prosperous times, a “hands off” approach is healthy, but we’ve technically been in a recession for at least a year, and it’s only the beginning. These are not prosperous times, nor are these even normal times.

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