Transcripts

"Commentary"-Giving The Auto Industry A Jump

SUSIE GHARIB: In tonight's commentary, how to jump start the auto industry. Here's Mark Zandi, chief economist at Moody's economy.com.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: The auto industry needs help and the government should provide it, but it must be the right kind of help. Without government aid, the big three will almost surely end up in bankruptcy, the kind of bankruptcy where they won't come out. It would be an effective liquidation and their operations shutdown. This would be disastrous for the sliding economy. The big three employ some 250,000 Americans, but 2.5 million jobs would be immediately at risk. Hundreds of thousands would lose their jobs when the economy is set to lose several million. What to do, pre-packaged bankruptcy with the government guaranteeing the financing for the big three in bankruptcy. The guarantee would ensure an orderly restructuring of the firms and not their liquidation. The bankruptcy court would force the changes needed to make the big three viable companies again. It is reasonable to worry that if the big three go bankrupt, people won't buy their cars. Who wants a car from a company if they aren't around to service it? Unfortunately, there is no better way to ensure that the big three will be around than if they are significantly overhauled in bankruptcy. Bankruptcy for the big three would also signal to any other industry contemplating asking taxpayers for help. They're much less likely to if it means bankruptcy for them. I'm all for an aggressive government response to this crisis. The economy needs a big fiscal stimulus plan and a comprehensive foreclosure plan, but the government's resources are not unlimited. This is Mark Zandi.