Transcripts

"Commentary"-Lessons Learned From The Auto Bailout Battle

SUSIE GHARIB: Tonight's commentator sat shoulder to shoulder with the heads of the Detroit auto makers at last week's bailout hearings. Mark Zandi weighs in on those hearings. He's chief economist at moody'seconomy.com.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: It was an honor to participate as a witness last week at the Senate Banking Committee hearing on the auto industry bailout. This is what I think I learned. Without government help, GM and Chrysler are weeks away from bankruptcy and Ford, while in much better financial shape, would likely also suffer the same fate as they share suppliers and dealers with the other two. Bankruptcy now in the midst of the worst recession since the great depression would be catastrophic for the broader economy. There would be as many as one million layoffs at the auto makers and other tightly linked industries next year when the economy is already set to lose several million. The auto makers are thus likely to get government help, at least enough to forestall bankruptcy in the next few weeks. With the money will come significant oversight, as policy makers want to make sure they are not throwing good money after bad. An auto czar would try to get all the stakeholders in the auto makers, from management to the UAW to the creditors to make concessions to get the industry back to long-term profitability. Unfortunately, odds are that despite policy makers' best efforts, the domestic auto makers will eventually be forced into bankruptcy. But that won't happen until the worst is over for the rest of the economy and by then, everyone should be prepared for it. Policymakers are thus buying time, for the domestic auto makers, yes, but more critically for the rest of the economy. It is worth the price. This is Mark Zandi.