U.S. comments: Obama motor plan is not anti-capitalist

Contrary to the views of many experts, we believe that the Obama administration's approach to the auto industry is not anti-capitalist. Without a drastic restructuring, Chrysler and General Motors have no chance of long-term success.　　Not only will tens of thousands of workers be out of work, but the government's tens of billions of taxpayer dollars would be lost. So the Obama team didn't just give the car industry a vote, as the previous administration did, but instead focused on restructuring the two companies. So far, the car industry task Force has rejected a number of motions proposed by the industry and the courage is indeed commendable. To make bold decisions, we need to conduct in-depth and detailed analysis.　　The decisions include reducing blue-collar jobs, shutting down numerous manufacturing plants and cutting dealers to restore industry capacity to "the right level", forcing many stakeholders (workers, retirees and creditors, including governments) to accept equity rather than cash, easing the debt burden of the two companies. Yet there are strong criticisms that the Obama administration has failed to fully respect the interests of creditors. The accusation was wrong.　　No creditor's rights have changed in the process. Banks still enjoy the same choices they often face in similar situations: accepting changes to their loans or taking over troubled companies. The vast majority of banks initially embraced the government's offer. They realised that without huge sums of money, Chrysler would not have survived and that the value they had gained in the liquidation process might not have been as valuable as the Government had provided.　　They know that without a drastic restructuring, the billions of dollars that Chrysler desperately needs cannot be achieved. The plan requires Chrysler's current and future retirees to accept entitlements in lieu of guaranteed benefits. Fiat must agree to accept shares as a means of payment for billions of of billions of dollars of technology. Unions must accept lower wages, large closures and unemployment.　　These policies are painful to all, but unfortunately, the current situation needs to be done. Interestingly, only bondholders have the opportunity to take large amounts of cash from Chrysler. For all stakeholders, any return depends on the hard work and investment necessary to achieve long-term success.　　It's hard, but it's capitalism. The creditors are also rational and sophisticated capitalists, who are well aware of the risks they take when they buy Chrysler loans. Many people may buy these loans at very low prices.　　While the creditors want the Obama administration to be able to give them a big red envelope (a reasonable expectation from the previous administration), they know exactly how risky these loans are and know that Chrysler cannot survive without taxpayer funding. Chrysler's creditors were not bad or not patriots, and they acted properly as qualified trustees of their own investors.　　But fortunately for the American people, the Obama administration has also made the right move, insisting that only taxpayers ' money be invested with a chance to succeed. General Motors ' claimsThe situation of the people is more at a glance. The Government's investment in General Motors (and the possibility of further additional investments in the future) has an absolute priority over creditors ' subordinated bond. As everyone knows, the value of these bonds will go to zero once GM is liquidated because it cannot get more taxpayer money. Even if bankruptcy does not lead to liquidation, and given the large amount of taxpayer money to be added to GM's renewal, it is not likely to leave much of the bond after the government's claim has been met. That's why these bonds are now priced at about 10 cents per 1 dollars.　　In that case, the government's 10% per cent stake in GM's bond holders has been quite generous. The Obama administration's policy towards Chrysler and GM has done absolutely nothing to undermine capitalism, exactly the "creative destruction" that economists Schumpeter called the power of capitalist success. The government has been willing to support an important industry, but only after all the stakeholders have made difficult choices for the long-term success of the company. This is how capitalism works.