How topical and appropriate is this. The first video below is an old cartoon that points out why capitalism is better than socialism or fascism and uses a an auto company theme. The next two videos have Peter Schiff arguing why the taxpayers should not bailout the auto companies but rather, let them reorganize via bankruptcy law. On the other side of the argument, we have Lansing Michigan Mayor, Virg Bernero, who, as a typical politician, is only concerned about his re-election and not doing what is right for the companies, their workers or the country. No one wants to swallow the hard pill. The companies, unions and local governments think they can continue business as usual without paying the consequences. There is pain and suffering on the horizon and its not going to get better until we all suffer through the recession.

Capitalism explained…

Part 1: Peter Schiff and Virg Bernero…

Part 2: Peter Schiff and Virg Bernero…

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I thought this article today by Peter Schiff, Author of Crash Proof fits well with the video’s I have inserted. Enjoy the collapse of the dollar. We’ll all be bbasking in tent cities before you know it…

Bailout-a-Go-Go

by Peter Schiff

Keeping track of the ever mutating bailout debate is becoming increasingly difficult. With the Federal money spigots now thrown wide open, and with no one of influence advising restraint, the only debate is where to direct the torrent.

During the past week, the talk began with Detroit and Citigroup, but by Friday had shifted to a massive “stimulus package” to bail out consumers. The early buzz includes some very large figures.

But first, a bit of a recap:

On Monday, the $300 billion Citigroup bailout took center stage. Once again Henry Paulson decided to throw taxpayer funds into a bottomless Wall Street money pit. Shockingly the Citigroup plan did not seem to demand any serious curtailment of lavish salaries and bonuses. Paulson’s shameless largesse to his Wall Street friends has elevated financial industry bonuses to entitlement status.

“Remember Lehman” now seems to be the rallying cry to justify any and all financial bailouts. But Lehman’s demise is in no way responsible for our current problems, and the decision to let them fail is the only bright spot in otherwise consistent record of policy mistakes. We bailed out Bear Sterns and AIG, and what did that get us?

The Citi bailout greatly increases the chances for a similarly misguided auto industry bailout. After all, if taxpayers ensure multi-million dollar bonuses for Citi executives, how can they refuse similar help for eight-figure auto executives and $70 per hour unionized auto workers?

It was inevitable that the size of these bailouts would up the ante for an economic stimulus package aimed at consumers. Not missing a beat, Barack Obama announced a $700 billion dollar fast-tracked package that will likely exceed $1 trillion before passage. (Trillions are the new billions.) The plan must be sending shivers down the spines of our foreign creditors who are expected to foot the bill. Add this cost to the hundreds of billions of prior stimulus and bailout packages, and the cost to our creditors is quickly heading into the multi-trillion dollar range. It can’t be long before they cry uncle and repeat the words of prizefighter Roberto Doran “No Mas.”

With so many familiar faces on his new economic team, Obama signaled his intention to “hit the ground running.” With the possible exception of Paul Volcker, all of his top appointees share the view of the Bush administration that the root causes of our economic problems lie in the reluctance of banks and other financial institutions to lend. As a result, we can expect a virtual continuance of current policy.

It is no surprise therefore that both Democrats and Republicans offered healthy “huzzahs” to Henry Paulson’s latest bazooka: $200 billion to purchase securities backed by auto, student, and credit card loans. It is hoped that with this transference of risk to taxpayers, lending institutions won’t be so cautious, and the credit-fueled American economy can thrive anew. This is unalloyed insanity that can only lead to total ruin.

Paulson stated clearly that he would print as much money as it takes to revive the economy. Unfortunately the only industry likely to be revived by such policies is printing itself. But even this will not help the United States as the majority of our printing equipment is imported from Switzerland.

But what if the root of our financial problem is that American consumers have already taken on too much debt? By trying to force feed even more credit down the throats of already overly indebted Americans, Paulson’s plan will only weaken the economy further.

Building on the groundwork laid by Paulson, the massive stimuli that will likely be pushed through by Obama and an overly eager Democratic Congress will further impede any real recovery. By swallowing up all available capital, spending to create government jobs will destroy far more private sector jobs. Rather than expanding government and increasing the national debt, policy makers should be thinking about doing the opposite.

The brutal truth that no one in Washington dares acknowledge is that our systemic economic problems can only be solved by a reduction in consumer borrowing and an increase in savings. We must repair our national balance sheet and a painful recession is the only path to achieve this. By interfering with the market’s attempts to bring this necessary change about, all the proposals currently coming from Washington or bubbling up from think tanks and Nobel prize-winning economists, will only exacerbate the imbalances and lay the foundation for even greater losses and a larger crisis.

A short-run reduction in GDP is a sacrifice we must be willing to accept. If we swallow this medicine now, in the long run we will have a sustainable rise in GDP as higher savings leads to increased capital investment, greater productivity, and eventually a lasting increase in consumption.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

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In the final days of the Bush Administration and the lame-duck 110th Congress, capitalism and Democracy as we know it are dead. If you have mismanaged your companies financials, no problem, grab your tin cup, jump on your private jet and head to Washington. Make sure you get that meeting with Nancy Pelosi and Harry Reid scheduled. They’ll make sure you don’t have to file for bankruptcy, whether you need it or not, and just lay down a few incidentals that need to be met for that new bailout package you were hoping for. If ever there were three companies that need to restructure under chapter 11 bankruptcy protection, it would be the Big-Three auto companies.

Oh My God, where is this government going. Do they know anyhing about business, economics or capitalism? In the following article, Donny Shaw explains that if it were left up to Pelosi and Reid, the Big-Three will get the $25 billion bailout they’re asking for. They just have to come back with a plan next time…

Pelosi’s Big-Three Bailout Deal

by Donny Shaw

The lame duck session is over and the Big-Three auto companies didn’t get their bailout. But the companies will have another chance to convince Congress this session to give them the money they say they need to stay out of bankruptcy.

When the bailout was shelved on Thursday by Democratic leaders in the House and Senate, House Speaker Nancy Pelosi also offered the companies a new deal: if they can submit a plan to Congress by December 2 explaining exactly how $25 billion from the government can make them financially viable, she’ll consider calling Congress back again for a second lame-duck session to re-consider the issue.

“Until they show us the plan, we cannot show them the money,” Pelosi said on Thursday.

So what do the auto companies need to do to convince Congress that they are a good investment?

Nancy Pelosi is already inclined to give the companies some assistance. “Doing nothing is I don’t think an option,” she said at a press conference on Thursday. For reasons of national security, the health of our financial system and the needs of U.S. workers, the survival of the auto industry is essential, she said. Furthermore, she specifically rejected the idea of allowing the companies to restructure through bankruptcy.

Really, it’s the rank-and-file of both parties that need to be convinced of the bailout.

Executives from the three companies testified before Congress this week (that’s them, pictured above), and the general consensus is that they didn’t do a very good job. Rather than focus on how their collapse would damage the economy, the company executives needed to build confidence in their vision for success in the future. Lawmaker after lawmaker repeated the same concern (typified here by Republican Rep. Jeb Hensarling): “What I have not heard is a plan that convinces me that with the $25 billion, that you will achieve sustainability.”

The executives also didn’t help their cause much by traveling to Washington in private jets. “There’s a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,” said Rep. Gary Ackerman (D-NY) at hearing on Thursday.

The companies have already begun dealing with the jet issue. GM announced today that they are putting two of their jets out of service. Now they need to present Congress with a clear, convincing plan for financial viability.

In a letter sent to the executives this afternoon, Speaker Pelosi and Senate Majority Leader Harry Reid spelled out exactly what they think needs to be in the plan submitted to Congress in order to gain support for the bailout:

The plan must:

• Provide a forthright, documented assessment of the auto companies’ current operating cash position, short-term liquidity needs to continue operations as a going-concern, and how they will meet the financing needs associated with the plan to ensure the companies’ long-term viability as they retool for the future;

• Provide varying estimates of the terms of the loan requested with varying assumptions including that of automobile sales at current rates, at slightly improved rates, and at worse rates;

• Provide for specific measures designed to ensure transparency and accountability, including regular reporting to, and information-sharing with, any federal government oversight mechanisms established to safeguard taxpayer investments;

• Protect taxpayers by granting the most senior status for any government loans provided, ensuring that taxpayers get paid back first;

• Assure that taxpayers benefit as corporate conditions improve and shareholder value increases through the provision of warrants or other mechanisms;

• Bar the payment of dividends and excessive executive compensation, including bonuses and golden parachutes by companies receiving taxpayer assistance;

• Include proposals to address the payment of health care and pension obligations;

• Demonstrate the auto companies’ ability to achieve the fuel efficiency requirements set forth in the Energy Independence and Security Act of 2007, and become a long-term global leader in the production of energy-efficient advanced technology vehicles; and

• Require that government loans be immediately callable if long-term plan benchmarks are not met.

The full letter can be read by clicking here.

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The following article emphasizes the point that we, as a nation, do not have the money to bailout Detroit or any other company/industry. Any bailout is going to come at the expense of borrowing more money from China, the Saudi’s or Japan. We cannot continue to borrow our way out of this problem. We must endure the hard times and whether through the impending recession. In time, our economy will heal itself.

I just finished reading Peter’s book, “Crash Proof: How to Profit from the Coming Economic Collapse.” It is a very worth while read if your even remotely curious as to how we got here. Who’s lying to who? Our federal government has clearly become the fox watching the hen house. In addition, here are two additional articles to read:

Weighing In On GM: GM Is Not Too Big To Fail

The Airlines Didn’t Get A Bailout Why Should Detroit?

The Truth About Bailouts

by: Peter Schiff

As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit’s depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn’t have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy.

The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What’s worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.

When it comes to bailouts, the real discussions are not centered in Washington but rather in Beijing, Tokyo, and Riyadh. With no money of our own, our ability to bailout our own citizens is completely dependent on the world’s willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.

Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to “lend” us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.

If Washington bails out General Motors, the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of “green” cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering “legacy” costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.

Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.

So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.

This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

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As I keep my eye on Congress (I can’t bring myself to trust them), I see that the current Capitol Hill beggers are the auto companies. Why not, after all, when there’s $700 billion floating around everyone who has mismanaged there company wants a piece of the pie. I posted an earlier article by Mitt Romney that pointed out why we should NOT bail out Detroit automakers. The following article by John Mauldin further backs up that stance.

November 18, 2008

Is GM Too Big to Let Fail?

By John Mauldin

(Let me say at the outset I am truly sorry for those who have lost their jobs or are facing the possibility of a job loss, whether at GM or any other firm. I have been there, as have most people at one time or another.)

I wrote in 2004 that GM was essentially bankrupt. They owed more in pension obligations than it seemed likely they would be able to pay, without major restructuring of the union contracts. I was not alone in such an assessment, although there were not many of us. Now that assessment is common wisdom.

Bloomberg today cites sources that claim a collapse of GM would cost taxpayers $200 billion if the company were forced to liquidate. The projections also called for the loss of “millions” of auto-related jobs. GM, Ford, and Chrysler employ 240,000. They provide healthcare to 2 million, pension benefits to 775,000. Another 5 million jobs are directly related to the three auto companies. GM has 6,000 dealerships which employ 344,000 people. According to a recent study by the Center for Automotive Research (CAR), if the domestic automakers cut output and employment by 50 percent, nearly 2.5 million jobs would be lost and governments would lose $108 billion in revenue over three years. (Edd Snyder at Roadtrip blog)

How did we get to a place where the market cap of GM is a mere $1.8 billion and its stock price has dropped from $87 in early 1999 to $3.10 today? (See chart below.) Where Rod Lache of Deutsche Bank has a “price target” of zero for GM? “Even if GM succeeds in averting a bankruptcy, we believe that the company’s future path is likely to be bankruptcy-like,” Lache wrote.

The litany of reasons is long. At the top of the list are union contracts which mandate high costs and pension plans which cannot be met. Then there is the problem of many years of poorly designed cars, although they are now getting their act together. We can also discuss poor management and bloated costs, like paying multiple thousands of workers who are not actually working. GM is structured for the 50% market share they used to command, whereas now they only have 20%.

Wilbur Ross, a well-known multi-billionaire investor, was on CNBC saying that allowing GM to go bankrupt would throw the country into what sounded like a depression. Of course, he does have an auto parts company which supplies GM; so he, as my Dad would say, does have a dog in that hunt.

Ross said that we as a nation are to blame for GM’s problems (I am not making this up) because we do not have a national industrial policy. The US allowed other automotive companies to build plants in states that had lower labor costs, and that is the reason GM is uncompetitive. GM pays an average of $33 an hour, and those selfish other companies pay a mere $19 plus a host of benefits.

Ross evidently believes that because some states have lower taxes and right to work laws, that it is the responsibility of the taxpayer to give GM a certain type of immortality rather than suggest GM deal with its problems directly. I assume that Ross also sides with the French when they suggest that Ireland should raise taxes so they will not have to compete with Ireland for business. Such thinking is nonsense and is also unconstitutional.

Let’s all acknowledge that having GM go bankrupt would not be a good thing. But it is not the end of the US automotive industry, nor even of GM. Let’s think about what a GM bankruptcy might look like. In a bankruptcy, the debt holders line up to come up with a restructuring plan so that they can maximize the return of their loans or obligations. The shareholders get wiped out, but with GM down over 95%, that has largely been accomplished. That process has happened with airlines, steel companies, and tens of thousand of other companies. It is called creative destruction.

First, let’s understand that the real owners of GM are the pension plans, as I wrote in 2004. They are the entities with the largest obligations and the most to lose. They are the biggest stakeholders in a successful GM. Giving them the responsibility for making a new, leaner, meaner GM with realistic union contracts would be rational; otherwise they would lose most of what they have.

Factories need to be closed. Auto sales are down to 11 million cars a year, the lowest since 1982, which was the last major recession. Automotive companies sold cars at such low prices in the last few years that sales went to 16 million a year. But the cars that have been sold will last for a long time. Few people are going to buy a new car when the old one is working fine, especially in a recession and a Muddle Through economy. Further, does GM really need eight automotive lines, some of which have been losing money for years?

A restructured GM with realistic costs could be quite competitive. They have some great cars. I drive one. It is four years old and so good I am likely to drive it for at least another four.

At some point after the restructuring, the pension plans could float the stock on the market and get some real value. If actual pensions need to be adjusted, then so be it. While that is sad for the GM pensioners, is it any sadder than for Delta or United Airlines or steel company pensioners who saw their benefits go down? For the vast majority of Americans, no one guarantees their full retirement. Why should auto trade unions be any different?

Taxpayers in one form or another are going to have to pay something. Unemployment costs, increased contributions to the Pension Benefit Guarantee Corporation, job training, relocation, and other costs will be borne. So, it is in our interest to get involved so as to minimize our costs, as well as help preserve as many jobs as possible.

Sadly, I think it is likely that a Democratic majority next year will quickly pass a bailout that will not solve any of the longer-term problems. Obama evidently wants to appoint an “automotive czar;” and the name being floated is the very liberal Michigan former Representative David Bonior, whose anti-trade and pro-union positions are well known. This is appointing the fox to guard the hen house. It is not a recipe for the restructuring that is needed.

The bailout for GM is a bailout for the trade unions and management (who not coincidentally both made large contributions to the Democratic Party and candidates). US consumers are simply going to buy fewer cars in the future. That is a fact. Spending $50 billion does not address that reality. That $50 billion can be better spent by helping workers who lose their jobs. Without serious reforms a bailout will simply postpone the problem, and there will be a need for more money in a few years. And do we think that the management which got GM into the current mess is the group to bring them out?

And as to the argument that “We bailed out Wall Street, so why not GM?” it doesn’t hold water. What we did and are doing is to try and keep the financial system functioning, so we don’t see the world economy simply shut down. But don’t tell the 125,000 people who have lost jobs on Wall Street that it was a bailout. That number is likely to go to 200,000. No one thinks that a restructured GM would see anywhere close to half that number of job losses.

Do we protect Circuit City? Sun just announced plans to lay off 6,000 workers. Where is their bailout? Citibank announced 10,000 further job cuts today. This is a recession. And sadly that means a lot of jobs are going to be lost. GM workers should have no more right to their jobs than a Sun or Citibank or Circuit City worker.

Now, would I be opposed to a bridge loan to help in the transition? No, because a viable Detroit is good for the country and will cost the taxpayer less in the long run than if we have to pick up their pension benefits. But any money must come with realistic reforms that put in charge new management and a realistic cost structure so GM can compete.

John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore

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Jeff Schreiber at America’s Right posted the following article written by Mitt Romney. I especially like Jeff’s writing and so I’m posting his comments here as well.

I didn’t believe in the bank bailout and I don’t believe that the auto industry should get a bailout either. I believe in restructuring based on market pressures and fluctuations. Its painful but that is the basis of a capitalistic society. We as a country have spent ourselves into this mess and we are not going to be able to continue spending what we don’t have. This is an opportunity for the auto industry to downsize rather than continue the charade that there will be customers after a bailout from Uncle Sam. It ain’t gonna happen.

Mitt Romney’s Recipe to Automaker Recovery and Success

I did not care for Mitt Romney at first. When this past election cycle began about two years ago and Romney threw his hat into the ring, I saw a wealthy, Ken Doll-type who knew what he was supposed to say and was all too happy to draw comparisons to Ronald Reagan in doing so. He came off as though he was parroting conservative talking points and, combined with his shaky record in Massachusetts, he didn’t rub me the right way.

Over the course of the primary contest, however, I saw a guy who could not escape from that wealthy perception no matter how often he ditched the suit and tie for rolled-up sleeves and a pair of jeans. I saw a guy who was frustrated at not getting the favorable press coverage that John McCain was getting. Most importantly, I saw a guy who may have started out saying what he needed to say, but who began to talk about and argue the merits of conservatism as he progressed along the campaign trail and, by the end of the contest, really began arguing those merits effectively and passionately.

By March, I liked Mitt. I was not thrilled with his intense rivalry with Mike Huckabee–a guy I really liked but felt as though may have overstayed his welcome–but I really enjoyed seeing that passion develop over the course of the campaign, perhaps because it mirrored my own growing passion. By the time he suspended his campaign at the CPAC Conference, I was firmly in his corner.

In the last few weeks of the campaign, after the economy seemed to reach its nadir and McCain botched a chance at simultaneously distinguishing himself from President Bush and showing his conservative bona fides by rejecting the $700 billion bailout, I really wondered “what if.” What if it were Romney at the top of the Republican ticket instead of McCain? How would the American public have reacted?

Romney, I believe, would have been less hesistant to call out Barack Obama for his radical associations. Romney, I believe, would have been crystal clear in placing blame for the housing crisis squarely where it belonged–on Barney Frank and the rest of those Democrats more interested in social engineering than common sense–and would have pointed out that the very people who drove Fannie Mae and Freddie Mac into the ground were among Obama’s closest financial advisers. Romney, I believe, would have been better prepared to speak directly to the American public and put the fiscally conservative solution to our economic problems in terms easy for all to understand.

I see a glimpse of the latter in this piece, which he wrote for The New York Times. He’s absolutely right, and here articulated the conservative solution better than I ever could.

–Jeff Schreiber

Let Detroit Go Bankrupt
By Mitt Romney, The New York Times

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

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