Auto Bailout Announced

President Bush announced $17 billion in Federal loans to Detroit, contingent on the Big Three’s adoption of reforms that will signal “a return to profitability.” The reforms generally follow Sen. Corker’s changes to the failed Senate bill — restructuring of UAW contracts and severe debt reductions — but place no strict timetable on the need for their implementation. Instead, the judgment will be left to Barack Obama.

Under the plan announced this morning, Mr. Bush essentially handed off to President-elect Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether General Motors and Chrysler are financially viable.

If, by March 30, the two companies cannot meet that standard — and clearly they could not meet it today — the $13.5 billion in Treasury loans would be “called’ for immediate repayment, with the government placed in top priority, ahead of all other creditors.

“Financially viable,” at least politically, seems open to a bit of interpretation. Though as the Times points out, Obama’s team will need to present a “convincing, public case,” it doesn’t appear that will necessarily mean that only provisions outlined by Republicans will need to be fulfilled. It’s like the companies will comply with union contract restructuring and the debt-for-equity swaps, but it’s also possible that Obama will impose his own reforms (forcing Detroit to abandon lawsuits against state emission laws comes to mind).

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