The US Senate rejected last night a $14bn bail-out plan for the ailing US car industry,
Bloody right too.
Chapter 11 is the right route.
Republicans refused to back federal aid for Detroit\’s beleaguered Big Three – GM, Chrysler and Ford – without a guarantee that the United Auto Workers agree to wage cuts to bring their salaries into line with Japanese carmakers by the end of next year. The UAW refused to do so before its current contract with the carmakers expires in 2011.
Everyone\’s going to have to take a haircut here. The shareholders wiped out, the bondholders taking a loss….but so too do the workers have to take a loss. That\’s why Chapter 11, that\’s the system designed specifically to enable such losses to be shared around.