European Media Against Detroit Bailout

As the "Big Three" American automakers continue their quest for a government bailout, European commentators have tended to take to the view that they should submit to the “survival-of-the-fittest” logic of market forces – not least, perhaps, because many European companies fear that a U.S. bailout would give the American manufacturers an unfair competitive advantage. The European media have focused on criticism that the U.S. industry has failed to remodel its faltering structure, and identified poor management and excessive wages and benefits negotiated by labor unions as the main causes of Detroit’s problems. While some Europeans argue that the U.S. companies should simply be allowed to fail, others believe that the best solution would be for them to spend some time in bankruptcy to restructure their operations.

• Bust would be better
  Editor and Publisher of the German weekly, Die Zeit, says General Motors is going under because “for decades it has ignored the writing on the wall and refused to adapt to modern market demands.” In addition to deficient management and high wage and pension costs, Joffe notes irresponsible stock market investments by GM managment, making the auto-conglomerate “the Harvard Business School prime example of incompetence.” Not only is the company almost bankrupt, but its financial problems prevent it from paying the more than $80 billion it owes its workers for health care expenses. Joffe disputes the panic logic of “too big to fail,” and says that the car industry would adjust to the market if the companies were to go bust. “Americans would not stop buying cars. The demand would not disappear, but rather will be diverted, so as to generate new jobs at its [the U.S. industry’s] competitors.”
• Saving Detroit
  The Economist believes that “bailing out Detroit would be a bad use of public money.” The British weekly, which circulates widely in the United States, says that despite prospects of a huge increase in demand for cars in emerging economies over the coming decades, the "Big Three" are not banks and giving them aid would open a Pandora’s box for ailing companies. “The United States created Chapter 11 [bankruptcy provisions] precisely to help companies that need protection from their creditors while they restructure their liabilities and winnow out the good business from the bad.”
• A GM Bankruptcy would not be the End
  Frankfurter Allgemeine's New York correspondent, Roland Lidner, argues that the “horror scenario” depicted by GM if it should file Chapter 11 bankruptcy is not necessarily accurate. “Several experts view a bankruptcy as the only way for General Motors and its American competitors, Ford and Chrysler, to correct the downfall,” he says. Although Rick Wagoner, GM’s Chairman and CEO, insists that a bankruptcy filing would lead immediately to asset liquidation, Lidner says that Chapter 11 bankruptcy would allow Detroit to take necessary radical action. He recommends that the government should not provide economic assistance until the industry has resolved the problems caused by its agreements with labor unions and its networks of far too many dealerships.