• First, the smaller cars will cost less and provide less profit for the auto industry. That will worsen the present losses.
  
• Second, many people won't buy small low fuel consumption cars. This is partly for safety reasons, including greater probability of death when in collison with a larger vehicle; partly for comfort, especially in mid-west and Western States where the average auto trip is far longer than in the eastern states; and partly due to the major decrease in the price of fueld, eliminating the need for buying small cars.
  
• Wth the worsening economic situation, new car sales will continue to plummet.
  
• Further reducing the profit on autos is (a) the increasing availability of cars made in China and other countries at far less cost.
  
• The promise of profitability when small fuel efficient cars are built is a fantasy.
  

Cost Reductions Can Only be Made Through Pre-Packaged Chapter 11 Filing

An argument is made that the auto makers can voluntarily bring about a reduction in costs. That is false. 

• The auto labor unions won't give up the exorbitant pay and benefits they had obtained years earlier by blackmailing employers through strikes. The minor reductions they've agreed to are insufficient.
  
• Reduction in the number of auto dealers cannot be made due to state laws. 
  
• Unused costly plants cannot be discarded.
  
• Huge debts cannot be changed.
  

For years, since about 1980, the auto workers had a "job bank," whereby workers no longer needed were paid to stay home, and their health plans were paid for. As many as 8,000 General Motors workers were paid to stay home, rather than be laid off. The huge cost of this union-forced requirement caused people buying General Motors or Ford cars to pay as much as $2000 extra. Is it any wonder that many people bought foreign cars.

Taxpayer money will only subsidize the outrageous benefits forced upon the companies by the unions.

The argument is made that people won't buy cars of companies in bankruptcy. Although that will affect some buyers, the fact is that without eliminating major costs through a pre-packaged Chapter 11 bankruptcy, the tens of billions of taxpayers money will be money down the drain, and the companies will eventually be forced into a liquidation Chapter 7 bankruptcy.

Another Consideration for Chrysler

While General Motors and Ford are public companies, Chrysler is a private corporation, owned by Cerberus Capital Management. That is the company famously known for highly-leveraged buyouts of major companies, firing employees in the acquired companies, saddling the acquired companies with debt, and pocketing huge fees. Cerberus is a profitable group, and is capable of putting its own money into Chrysler. Any taxpayer money put into Chrysler will profit Cerberus.

The most probable course to follow would be for the auto companies to go into a prepackaged Chapter 11 bankruptcy, with the government providing debtor in possession funds for General Motors and Ford. That would provide maximum protection for taxpayers against loss, and enable a forced reduction in cost. The bankruptcy courts would make such changes as:

• Renegotiate loans.
  
   
• Eliminate plants and properties that are idle and causing a drain on income.
  
   
• Eliminate the practice of paying furloughed employees their salaries and costly medical and retirement benefits. Even the taxpayers who are asked to pay tens of billions of dollars to pay the huge losses at the car companies don't have these lucrative employee benefits.

The charge that General Motors and Ford company management were not competent—made by members of Congress, of all places!—fails to realize the predicament that the companies were put into when the unions blackmailed the companies by shutting down operations, forcing the companies to pay the salaries and benefits of furloughed employees, huge health care and other benefits that most Americans don’t enjoy, and restrictive work rules.

Facing the Consequences

The truth is that the people of the United States are facing catastrophic financial and personal tragedies as a result of a combination of factors. These include, for instance:

• The present housing and financial debacles will continue to worsen, as never before. (Detailed in the book, America's Housing and Financial Frauds)
  
• The housing and financial debacles were brought down upon the American people by widespread greed and corruption in and out of government.
  
• These elements and culture are the same that have been responsible for many other tragedies inflicted upon mthe American people, and follow a similar pattern.
  
• Enabling the culture of corruption to occur was the corruption involving members of Congress; the cover-ups by media people; and the determined ignorance by most of the American people who refuse to read books on meaningful subjects, combined with apathy and denial.
  
• All of the above are detailed and documented in 19 books written by and with the input from large numbers of insiders.