What’s so bad about bankruptcy for Detroit?

Even as Detroit's Big Three automakers teeter on the brink of collapse, United Auto Workers President Ron Gettelfinger said Saturday his workers will make no more concessions.

Instead, Mr. Gettelfinger called on Congress to act quickly on a bailout for the industry, saying action is necessary before President-elect Barack Obama takes office.

The union chief warned that if they filed for bankruptcy, the automakers would find it difficult to restructure and instead could end up out of business. "Would you buy a car from a bankrupt automaker?" he asked.

Well, did American commuters buy tickets on the famously "bankrupt New Haven Railroad," or more recently on airlines which were reorganizing under bankruptcy protection? Yes, they did.

Why this bum's rush for a congressional "bailout"? Why this demonizing of the well-established option of bankruptcy protection, when this is precisely the circumstance for which our bankruptcy laws -- the envy of the world's economies -- were designed?

If the current bank bailout is a model, the word "bailout" has essentially now come to mean (quite literally) "the government will purchase shares of your stock as a way to bolster your balance sheets."

That's the form of economic central planning made popular by Mussolini and Hitler. Is that really where we want to head?

The best thing Congress could do to "bail out" Detroit -- at no financial cost to taxpayers, and at a considerable benefit in highway safety -- would be to repeal all "fleet fuel economy" standards, allowing automakers to build exclusively the more attractive, more solid, more profitable cars and trucks U.S. consumers want.

But that's never going to happen if Washington becomes more directly involved in auto plant management, rather than less.

The first thing any competent bankruptcy judge would examine, in the case of Ford, Chrysler and GM, is their unsupportable labor costs under their current union contracts -- especially their long-term health care promises. Shed those (even without a repeal of the so-called "CAFE" standards), and the industry might very well become profitable again.

But once Congress steps in to forestall that orderly process, we'll likely end up with white elephant auto plants in Detroit that will never again compete on true cost and quality with free-market factories elsewhere, instead turning out cars consumers don't want, under management by a consortium of federal bureaucrats and the labor unions.

Do you suppose they'll do as well as the Russians did with their Lada? And how will Congress then deal with the refusal of consumers to buy their new models, the Rayburn, the Meany and the Hoffa? By piling punitive "windfall" taxes onto their remaining free-market competitors to "level the playing field"?

Fortunately, chances for a rash move toward nationalization before January are already fading. Till then, the Republicans still have 49 senators, and they're balking.

Good. You wouldn't buy a used car from a salesman who told you, "This offer expires in 10 minutes!" We should be at least as cautious about a bum's rush to nationalize a major part of the U.S. economy.