Investor Wilbur Ross says a U.S. automaker bankruptcy filing would devastate the economy.
"It would be a total mess,” Ross says.
An automaker failure would mean increased government spending for unemployment benefits, health care, and pensions, he warns.
“It doesn't add up that (the government is) letting GE and American Express become banks to get aid, but they won't save the car industry,” Ross told Bloomberg.
Going to court to reorganize would be "a very inhospitable environment for any of these guys,” Ross says.
The current weak economy and frozen debt markets would mean that filing for bankruptcy would lead to liquidation, not financial reorganization, he says.
GM, Ford, and Chrysler have asked for $25 billion in bridge loans to support their operations while they weather the worst automotive market in 17 years.
That’s in addition to $25 billion already approved to develop fuel-efficient cars.
Senate Banking Committee Chairman Christopher Dodd on Thursday said he doubted that a bailout for automakers would happen this year.
The Big Three U.S. automakers have created the problems they now face, according to Automotive Consulting Group resident Dennis Virag.
Virag says, however, that now is not the time to punish them for past sins.
"I'm upset with the thought of the taxpayers having to pony up to save an industry that has made mistake after mistake,” Virag told the Los Angeles Times.
"But then I look at the dire consequences of the collapse of an entire industry and I need to swallow hard and say, 'Let's get it done.'"
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