Be careful what you wish for, is an oft-heard admonition, because you just might get it. That's the dilemma facing U.S. automakers as they continue to press for the government to bail them out.
It looks like Congress is gearing up to let them have access to the bailout funds that were originally to be used for propping up financial companies. While General Motors (NYSE: GM ) and Ford (NYSE: F ) might consider that a victory of sorts, their case may have been too persuasive, in that the carmakers may not like the strings that come attached to the money.
For example, the bill being considered by Congress is said to include a government oversight board that would have a say in the future direction the carmakers take and more stringent control of executive pay. Would GM still be allowed to buy Chrysler after the storm passes? It would have to get that past the political appointees sitting on the board. Ford wants to jump-start its pickup truck plants, thanks to now-lower gas prices; would the board members agree with the decision?
Of course, automotive parts manufacturers see this as a chance to feed at the trough as well. Lear (NYSE: LEA ) , for example, recently posted huge losses, as did Visteon. With more than 600,000 employed by auto parts makers, according to one report, the industry's position is that the ripple effect of withholding aid to the automakers is hurting them, too. In fact, they argue they should have access to the funds as well.
The labor unions that have been agitating for greater aid above and beyond the $25 billion already approved for the carmakers to retool for more fuel-efficient cars might want to take heed as well. With pay and benefit packages typically more lucrative than those enjoyed by Toyota (NYSE: TM ) or Honda (NYSE: HMC ) , concessions will probably be necessary.
The industry players are circling now and the politicians are throwing chum in the water to create a feeding frenzy. But the ones who will be eaten are the taxpayers. Giving GM, Ford, and Chrysler more money doesn't ensure they will survive since the structural defects of the industry remain in place: too many brands, too many expensive labor contracts, and too little recognition of consumer and industry trends. Further, an oversight board does nothing to ensure that the right decisions get made -- the history of Fannie Mae (NYSE: FNM ) and Freddie Mac (NYSE: FRE ) makes that clear. Instead, it risks becoming a dysfunctional relationship where bowing to political pressure is the norm and protection from real reform is encouraged.
Although GM says bankruptcy is not an option, it's becoming clear to this Fool that protection through the courts is the best option. Only in bankruptcy will the carmakers be able to shed their expensive legacy costs and truly retool their operations for greater efficiency, both in the cars they make and the businesses they run.