Most politicians and business leaders are still, in public at least, in denial about how serious our economic problems really are. We have reached the "Tipping Point" and must do what we can to try and keep a collapse from occuring.
I fully support the 25 billion dollar bridge loan to the car makers to get them through the first of the year. That being said, I think there is very little chance these companies will survive without a major restructuring, far beyond what they are currently contemplating. In all probability they will need to go into a bankruptcy based restructuring to survive.
I do not believe the estimates of future car sales by domestic manufacturers, made before Congress, will be anywhere near what they suggest. The CEO's say they expect a "recovery" in 2010 that will return sales to the 15 million units level from current sales of 11+ million units. They derive these numbers not from a realistic appraisal of future market demand, but based on wishful thinking and demand levels they know they will need to survive. If instead of 15 million units in 2010, demand were to shrink to 8 or 10 million units it is doubtful that any of these car makers could become small enough, fast enough, to starve off collapse. Furthermore, even if demand does not decline from current levels even a flat future demand curve will likely see a further decline in domestic car manufacturers market share due to the enormous amount of negative product and company publicity they are currently receiving.
So why, given the very negative outlook I project for this industry, do I support the bailout? Because we simply can't afford to let these companies collapse at this time. The economic consequences of 1-3 million job loses during the on going financial collapse would be devastating to our economy. If there is even a 10% chance that Detroit can survive, then we must take the chance and hope that they will make it. That is the enormously difficult and dangerous circumstances we currently find ourselves in.