Daily Archives: November 21, 2008

John Gapper

Tim Geithner, the new US Treasury Secretary-apparent, is very like his new boss.

First, they are the same age. They were both born in August 1961.

Second, they both have a modest, likeable manner (despite being ambitious and self-assured).

Third, they are both thin and youthful-looking.

Fourth, they both had an Asian upbringing. Mr Geithner went to school in Thailand, Mr Obama in Indonesia.

Fifth, they are both cautious, pragmatic policy wonks.

All in all, they should be able to work together well. 

John Gapper

Since the heads of the big three Detroit car companies have been told to go away on their private jets and come back with an actual plan for saving themselves, the prospects for a no-strings bailout by the federal government have dimmed.

Even Barack Obama’s transition team seems to be exploring the idea of planned Chapter 11 bankruptcy instead.

I believe that pre-packaged Chapter 11, with GM and Chrysler merging as part of the deal, is the best way forward for an extremely troubled industry. That is the approach backed by Jack Welch, and here are my own reasons for supporting it:

First, it provides a plausible path forward. Even the Democratic lawmakers who were inclined to give the Detroit companies up to $25bn could not justify it to themselves or the voters, faced with companies that could not explain how it would help in the long-term.

Rick Wagoner of General Motors estimated the long-term level of US car sales at 14.5m, which is a big fall from the peak. That in itself implies that the car companies need to restructure and shrink. But there is no evidence of how this would be done – or if it would be – outside Chapter 11.