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Comment by fallentimes | Hacker News Reader

The entire time I read this article I found myself nodding in an agreement. I found myself doing the exact opposite during Romney's campaign.

As a Detroit native - and this is hard to write - the car bailout should not happen. GM, Chrysler & Ford are currently nothing more than welfare vehicles. Lots of people will go bankrupt and lose their jobs (my Dad already has), firms will die and Detroit will be in absolutely awful shape. But right now they're just prolonging the inevitable and wasting taxpayer money.

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Romney has a proven record of turning around sinking ships. Both the Bain Company and the 2002 Winter Olympics were in bad shape when he took the reins in 1990 and 1999 respectively. He fixed both of them and remade them into viable ventures. I'm quite apt to take his word when he says a managed bankruptcy is the best option for the US auto industry.

and one wonders why bankruptcy is suitable for any other company in america, including airlines that have gone in and out of bankruptcy numerous times over the years...yet this same option is not permissible for the big3?

this is exactly why ch.11 exists - to allow freedom to restructure

A big 3 bankruptcy will be bad for auto workers, since the bankruptcy judge will rewrite their contracts. Since they currently get way above market rate, the judge will probably give them a pay cut, and authorize the layoff of many (1).

Take a look at which politicians support the bailout. Then take a look at which politicians get UAW money:

http://www.opensecrets.org/orgs/summary.php?id=D000000070

Coincidence?

(1) Due to union contracts, the big3 are unable to lay off workers as a normal company would do.

A big 3 bankruptcy will be bad for auto workers

yes, i think that is understood. they're going to live in the real world one way or another

get them out of the big 3 and they can find work that the economy values. will they find it soon? no, but then again maybe trying to compete in the global economy with a high school education wasn't such a bright idea after all

this is just about a huge chunk of our economy that has been living in the 70s finally forced to join the rest of us

As I understand it, the big 3 are saying they _can't_ file for chapter 11 bankruptcy due to the current lending climate. They argue that since the financing climate is so harsh, no one will finance them while they restructure, thus forcing them into a chapter 7 bankruptcy-effectively causing a fire sale of the company and its assets.

Sounds like Romney is advocating a "managed bankruptcy" where the government would facilitate a chpt11 bailout of the Big 3. Republicans want to avoid supporting an all out bailout whereas Democrats want help "main street" by helping the Big 3 avoid big-bad-bankruptcy. Obviously there is a lot of word wrangling going on in politics but it seems like this would be a good solution if it is communicated well.

Technically, this is called debtor in possession financing. The DIP financing agent has a higher priority than existing debtors and bondholders when it comes to getting a payout after restructuring.

Airlines have other vehicles protecting them.

For example, Qantas (the Australian Airline) is one of the few airlines to have made a good profit consistently. This is mostly because they have the US/Australia route all to themselves. The US counterpart hasn't been highly functional for a while & no one else was allowed in.

If United had gotten back onto it's feet at some point, they would have only had to face Qantas, who had themselves gotten cushy.

The auto market will not save them their seats.

Romney has a proven record of turning around sinking ships.

Was that a deliberately mixed metaphor? Turn around a sinking ship and all you get is a wreck which faces in the other direction.

That's so funny I had to tell you. I'm sorry ;)

He must have been thinking of his business track record and his presidential campaign at the same time. :)

What does Romney stand to gain if the big three go into a "controlled bankruptcy"/government take over? If they fire all the executives at those companies as he suggests, will Bain Consulting make a lot of money guiding the automakers through a restructuring? I don't want to sound conspiratorial but it is convenient that he's publically expressing opinions like this while closely tied to a company that does business consulting.

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