Let Chrysler Liquidate

James Kwak over at The Baseline Scenario has been doing some smart thinking about the auto industry. His analysis is here: Kidnapping Chrysler!

I especially endorse his views about Chrysler. Think about it: Chrysler is owned by a private equity firm, Cerebus, so the owners have access to capital whenever they can find something worth investing in. Presumably the capital comes from secondary investors which may include banks, but there should be enough capital floating about for an investment to be made if it looks like a good bet.

But what’s going on with Chrysler?

Cerebus is trying to get the government to invest more money, based upon the new ‘restructuring plan’ Chrysler submitted yesterday.

So, as Kwak points out, the plan is not good enough for a bunch of savvy private equity folks to invest in, but it supposed to be good enough for the taxpayers?

Ummm … no thanks. Let’s get Chrysler liquidated. If Cerebus doesn’t believe the Chrysler plan is worth investing in, why should we? Heck, it’s their own plan! I doubt whether Chrysler submitted a plan to the government without the full knowledge and support of its only shareholder.

Now as for GM.

Well they’re a lot bigger and the damage they would cause were they to go down completely is probably too much for the economy to handle. A few months ago I would have argued for them to enter privately financed bankruptcy. Now it looks as if they will have to go through some form of government assisted bankruptcy. Only we are not calling bankruptcy we are calling a a ‘reorganization’. Same thing. Either way the pain will be intense in the communities where GM operates. It looks like 45,000 jobs will go and almost half the production facilities. Not to mention brand names like Saturn and Pontiac.

The end of an icon is never pretty. GM’s demise will be a mess and will cause an outpouring of sentimental nonsense. Still it will live on in some form, so the national psyche should not be too affronted.

Which causes me to wonder: where is all the outrage about executive pay at GM? The stimulus package signed into law yesterday included some fairly draconian language about pay levels in the financial sector. I hope that the same standards will apply everywhere.

I can dream can’t I?