In his first big interview since the election, President-Elect Obama told 60 Minutes that he was commited to a bailout of the automakers, though he said the loan must not be a “bridge loan to nowhere” (clever, if not totally original), and that all the key stakeholders must get together to chart a vision of a sustainable auto industry. Well, good. At least he doesn’t want to just throw cash on the incinerator:
Obama: For the auto industry to completely collapse would be a disaster in this kind of environment, not just for individual families but the repercussions across the economy would be dire. So it’s my belief that we need to provide assistance to the auto industry. But I think that it can’t be a blank check.
So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labour, management, suppliers, lenders, all the stakeholders coming together with a plan what does a sustainable U.S. auto industry look like? So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere. And that’s, I think, what you haven’t yet seen. That’s something that I think we’re gonna have to come up with.
Here’s the thing. While we agree that if money is given to Detroit, there needs to be major conditions, what can they realistically come up with while GM is standing their with a nuclear bomb promising to drop if if they don’t get cash in the coming weeks? The stakeholders have been trying to envision a new model for Detroit for decades.
On the possibility of bankruptcy, he says
Kroft: Are there a lot of people that think that the country would probably be better off and General Motors might be better off if it was allowed to go into bankruptcy?
Mr. Obama: Well, you know, under normal circumstances that might be the case in the sense that you’d go to a restructuring like the airlines had to do in some cases. And then they come out and they’re still a viable operation. And they’re operating even during the course of bankruptcy. In this situation, you could see the spigot completely shut off so that it would not potentially permit GM to get back on its feet. And I think that what we have to do is to recognise that these are extraordinary circumstances. Banks aren’t lending as it is. They’re not even lending to businesses that are doing well, much less businesses that are doing poorly. And in that circumstance, the usual options may not be available.
On comparisons to the depression:
Kroft: People are comparing this to 1932.
Mr. Obama: Right.
Kroft:Is that a valid comparison, do you think?
Mr. Obama: Well, keep in mind that 1932, 1933 the unemployment rate was 25 per cent, inching up to 30 per cent. You had a third of the country that was ill housed, ill clothed, unemployed. We’re not going through something comparable to that. But I would say that this is as bad as we’ve seen since then. And if we don’t take some significant steps then it could get worse.
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