Take Bankruptcy off Table for Detroit 3

The Bush administration is still working on aiding Detroit's automakers and that's good news, but it is still clinging to some sort of bankruptcy as one of its options. That is one of the worst scenarios confronting an already desperate industry.

White House spokeswoman Dana Perino said Thursday that "there's an orderly way to do bankruptcies that provide more of a soft landing. I think that's what we would be talking about."

President George W. Bush, according to an Associated Press report, mentioned bankruptcies orchestrated by the federal government as one possibility for a domestic auto rescue package.

Bankruptcy — including some sort of pre-packaged bankruptcy, should be off the table.

The automakers themselves have argued against it, but so have such disparate observers as U.S. Rep. Barney Frank, D-Mass., and business and economics consultant Kriss Andrews. As many have noted, the effect of the word bankruptcy on auto sales would be extremely damaging. Auto buyers have a continuing relationship with a manufacturer for service and parts. The situation is not at all similar to purchasing a ticket on an airline in bankruptcy proceedings.

There are simply too many other choices for auto buyers — Honda, Toyota, Hyundai, Nissan and Volkswagen, to name a few. All a bankruptcy would do is worsen the cash-flow crisis that has brought General Motors Corp.

and Chrysler to the brink. Both have said they will be out of operating cash within a few weeks.

A pre-packaged bankruptcy would require that all of the stakeholders of an auto firm — investors, employees and their unions, and suppliers — be on board in advance and agree to some sort of financial settlement. That would take intense negotiations. Parts suppliers are holding off on demanding immediate payment, awaiting news from Washington on an aid package. A bankruptcy proceeding, even a pre-packaged one, won't be helpful in gaining their continued forbearance.

And there simply isn't time for that.

House Speaker Nancy Pelosi, D-Calif., Thursday reiterated her call for an aid deal that looks like the package the House passed — which included a requirement that automakers be subject to state as well as federal emissions and fleet mileage requirements — a guarantee that the Detroit automakers would stay insolvent. That's a bad idea, too.

What's needed is a quick cash infusion with some protections for taxpayers to allow the auto firms to continue their restructuring. Congress has already imposed new fuel-efficiency requirements that will cost an estimated $85 billion.

The federal government doesn't need to make the process of aiding the industry so complicated that it becomes self-defeating.

President Bush has said with regard to the auto industry that he doesn't want to leave "a mess" for President-elect Barack Obama. If aid to the domestic auto industry is bungled, he will have done just that.

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