Bailseverimulus

I don't get it about the auto bailout, particularly the panic in all the Asian markets on Friday at the announcement of its failure to pass in the Senate. Am I missing something? (No, it wouldn't be the first time, I know.)

Yes, they are iconic global symbols of US manufacturing prowess (alongside other such 21st Century global powerhouses such as, er, Boeing and um, Caterpillar, and, er...) and huge employers both themselves and in ancilliary businesses etc (huge-ness of payrolls kind of being one of their problems.)

But they make essentially the wrong products for the market, and do so inefficiently - exacerbated by legacy pension etc issues and rampant, thinly disguised '70s style "Winter of Discontent" unionism so until pretty much all that changes, the problems simply won't go away.

With or without bankruptcy protection, with or without a bailout, the "Big Three" have to cut staff massively, change management (and groupthink) almost totally and renegotiate legacy pension and related liabilities.

Would a bailout rather than Chapter 11 actually change anything? Would a $14bn (or $35bn) bailout encourage creditors (suppliers, banks etc) to continue to lend to the automakers, or would they pull in their horns and limit credit risk? And would it get people who are even reluctant to buy a Toyota or Hyundai or F1-less Honda to fork out a piece of their uncertain finances to pick up any of their crappy cars?

I take the point that another massive blow to the economy at this point would be negative - but not selling cars IS already a huge blow to the economy. Generous severance to employees (and perhaps assuming a chunk of the legacy pension liabilities etc) would be far better use of bailout money and a direct fiscal stimulus, besides easing the way to a restructured and healthier US auto industry.

Either way, the failed bailout in the currently proposed format is no reason for a market pukefest, especially when you KNOW that something along those lines (but tweaked) will get passed somehow sooner rather than later.

I see what happened in Asia on Friday as 1.) simple profit taking after a sharp and generally unexpected run, and 2.) reading too much of the US-centric (and increasingly tabloid-style) financial press.

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