The U.S. government should proceed with the proposed bailout of the Big Three automakers, but a key condition of funding should include a massive reorganization through Chapter 11 Bankruptcy, business magnate Donald Trump says.
Trump on Wednesday said a combined bailout and bankruptcy would restore consumer confidence in the carmakers and allow Detroit to pay its creditors, which will boost the U.S. economy. The survival of General Motors, Ford and Chrysler is important to the long-term health of the United States, Trump told CNBC.
"It would seem to be that they should Chapter 11 it and the country should put up the financing," said Trump. "You have to save the car industry in this country. General Motors can be great again. Ford can be great again. And Chrysler could be great."
Dismissing arguments that bankruptcy filings would spook consumers, Trump noted that a number of other major U.S. industries have survived, and even thrived, after court-ordered reorganizations.
"If you look at the airlines, I mean, I'd rather buy a car than fly in an airline that is in Chapter 11," said Trump.
"When Delta went, when United went, and so many others, people didn't stop flying. In fact, I think their business went up. As long as they know the company is going to exist, people will continue to fly. You sit there as long as it takes to get wonderful union contracts and wonderful contracts with your suppliers and everyone else."
Democrats in Congress are supporting the $15 billion bailout of Detroit, and President Bush has as well, though he has pushed for provisions in the legislation which would enable a federal overseer, a "car czar," to compel the automakers to enter bankruptcy, if need be. President-elect Obama has supported the plans too.
"I think that the big three U.S. automakers have made repeated strategic mistakes," Obama told reporters.
"They have not managed that industry the way they should have, and I've been a strong critic of the auto industry's failure to adapt to changing times -- building small cars and energy efficient cars that are going to adapt to a new market."
Conservative Republicans in the Senate, however, do not support any of this and are threatening a filibuster, according to a report in Politico.com.
Sen. Richard Shelby (R-Ala.), who voted against the $700 billion bailout of Wall Street this past fall, said he thinks GM, Ford, and Chrysler should skip the $15 billion aid package from Washington, and simply go straight into bankruptcy.
He is supported by a number of others, including Sen. John Ensign (R-Nev.), who are concerned that Detroit may soon emerge as another yet government-sponsored enterprise (GSE), like Fannie Mae and Freddie Mac.
"These companies basically have failed or are failing," said Shelby. "They probably need, according to some people, about 60 percent of the management to go and about 40 percent downsize of the workers."
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