Last night while marshaling votes for the House’s eventual 237-to-170 vote in favor of nationalizing Detroit, House Majority Leader Steny Hoyer (D-MD) told the Wall Street Journal: “If we do nothing we face the risk that sometime soon there will be no American auto industry.” Hoyer has it exactly backward. A government takeover of the Big Three represents the biggest threat to their long-term existence, while a Chapter 11 restructuring is the best way to ensure the long-term viability of the industry.
Bankruptcy Does Not Mean Death: The auto nationalization cheerleaders keep claiming bankruptcy proceedings for the Big Three automakers would cause a loss of 3.3 million jobs. This is a completely fictional number that assumes all three automakers would go bankrupt simultaneously and that all three companies would then immediately cease all operations entirely. Both assumptions are completely false. Ford has said repeatedly that it is in better financial shape and does not need taxpayer money. Furthermore, under Chapter 11 any firm that did declare bankruptcy would still be able to operate under the protection of a bankruptcy court. Continue reading . .