Detroit Failed Already

From the ongoing series don’t assume away reality:

If you are arguing against an auto industry bailout, you must not let the issue be framed in terms of either letting them fail or not letting them fail. We do not have a choice between letting Detroit fail or saving them. The only choice is between letting them fail now or spending billions of dollars in an attempt to save them.

The strongest argument against an attempt at saving them is that, while its costs are certain to be high, its success is far from guaranteed. In fact, it will probably fail.

The thing about industrial bailouts like this one is that they only come about if they are likely to fail. If this was, as Nancy Pelosi seems to put it, simply a matter of surviving this downturn, then chapter 11 protection would suffice. If this was about a lack of cash on hand and turn-around opportunities abounded, then distressed assets investors would try their luck. It is the fact that most people who know anything about the industry think that there is little chance of a turn-around that makes them need a bailout.

The choice is between letting Detroit fail now or later (after spending a huge amount of money and energy).

From the ongoing series don't assume away reality: If you are arguing against an auto industry bailout, you must not let the issue be framed in terms of either letting them fail or not letting them fail. We do not have a choice between letting Detroit fail or saving them. The only choice is between ...