Automotive Leftovers...

...the WSJ has an interesting op-ed today that concisely explains why the federal government absolutely should not issue the Big Three automakers below market (and federally guaranteed) loans in this crisis time:

And what about the precedent the government would set? If we bail out Detroit, where do we stop? The newspaper industry is in financial trouble because more readers and advertisers are turning to the Internet. Newspapers are good for democracy -- Thomas Jefferson said he would choose newspapers over government, after all -- so shouldn't they get low-interest government loans to help them adjust to the Internet? Of course not, and ditto for Detroit.

If Detroit's auto makers would apply more than knee-jerk analysis to what's being proposed, they would reject it quickly. No matter what their spin, including the patently absurd claim that government-guaranteed, below-market loans aren't a bailout, loan subsidies will paint them in the public mind as corporate welfare recipients that can't compete on their own. That can't be good for sales.

More fundamentally, the last thing these companies need just now is more debt. They are leveraged to the hilt, and risk climbing into a financial hole from which they'll never recover. Better to raise money by selling more assets (e.g., Ford's recent sale of Jaguar and Land Rover) or raising more equity -- even if new investors would require management changes or other measures.