Detroit, Mich. -- Bush punted.
The conventional wisdom was right. The Bush Bailout Plan for the Detroit Three announced this morning essentially pushes the problem of Detroit’s auto companies to the next administration by falling back to last week’s House Democrat/administration compromise authorizing $13.4 billion in loans to the automakers.
Yes, the plan conspicuously bows to some provisions pushed by Sen. Robert Corker (R., Tenn.), including calls for the companies to reduce their debt obligations by two-thirds — mostly through debt-for-equity swaps — and that they reach an agreement with the United Auto Workers union to cut wages and benefits to “competitive” rates.
But unlike Corker’s bill — which was torpedoed by the UAW — the Bush “targets” are not legally binding and thus subject to re-interpretation or plain rewriting by the Obama administration.
The targets, the Wall Street Journal reports here, “would be non-binding in the sense that negotiations can deviate from the quantitative targets . . . providing that the [company] reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.” That’s a loophole you can drive a truck through.
The terms are a long way from the “orderly bankruptcy” tease from White House press spokeswoman Dana Perino Thursday and is hardly the image of a tough, poll-shirking cowboy that Bush painted of himself in a Wednesday Fox interview in which he said “I didn’t compromise my soul to be a popular guy.”
Perino’s statement set off alarm bells in Detroit, where a public bankruptcy would force real concessions from the UAW and cause short-term pain in return for the long-term viability of the companies. Still, auto suppliers like Tom Leuliette, president of Dura Automotive Systems, approved, saying “giving some or all of the Detroit Three a prepackaged bankruptcy is an ideal long-term solution.”
In Bush’s defense, however, even the most fiscally conservative Republican senators recoiled at a public Chapter 11.
In the end, Bush (and Paulsen) made the easy call. And taxpayers are now on the hook for a bridge loan — to more loans that may total $125 billion before it’s all done.