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December 12, 2008

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Why not let the Bankruptcy Court handle auto company restructuring, as they successfully did with the airline industry? I am not hopeful that Congress or the Administration has the expertise, attention span, or political gumption to do an effective job of restructuring.

Not to prejudge, but it is likely that significant union concessions are amongst the changes needed to return GM into being a viable company, not one limping along on periodic corporate welfare. Also,revamping the GM management culture that led to the decline of such a venerable institution will be necessary.

The Bankruptcy Court can appoint competent Master(s) to sort through the various interests and develop a viable business plan. Concessions probably will be needed from the Management(compensation & perks), workers (union contracts), suppliers (credit concessions), dealorships, etc. And, the alarmists notwithstanding, this time-consuming process can occur while keeping the businesses in operation under the "Debtor in Possession" provisions of the bankruptcy code.

Any "Car Czar" appointed by Congress or the Administration will be subject to ongoing politics, and thus be in a difficult position to impose tough medicine on any of the interested groups. For example, how likely is it that Frank/Dodd/Reid/Polisi would quietly stand by if/when a Car Czar tried to wring out significant union concessions? The unions paid too much during the recent election cycle for that to be a possibility.

Congress always could pick up the pieces if the Bankruptcy Court solution rankled enough people. Hopefully, however, "correction" would be approached openly, rather than through the hidden earmark process. An example--Congress could enact legislation enabling the industry to conduct joint research, under stated conditions, without violating the Antitrust Laws.

Just as patriotism may be the last refuge of scallawags, cries of "the sky is falling" are a refuge of scallawags trying to extract public money from Congress.

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