Cato Scholar Comments on GM Bankruptcy and Ford's Future

Monday, June 1, 2009

Daniel J. Ikenson, associate director, Center for Trade Policy Studiesdikenson@cato.org:

It's not as if we didn't know this was going to happen to GM for a long time now. The real question we all should turn to is: What's going to happen to Ford? The government has a 60 percent stake in GM. Who's going to want to own Ford stock—and therefore, will Ford be able to raise capital—when the U.S. government has an incentive to tip the balance in GM's favor wherever it can?

Also, if I'm on the board of directors at Ford, now I'm thinking that the rest of the auto industry is surviving more or less on the whim of the U.S. government. So even if my balance sheet is healthy enough to go it alone, why am I not going to try to get whatever I can out of Washington? There's the specter that the taxpayer is now going to be on the hook for yet another $30-$40 billion once Ford's leadership decides, "Hey, this bankruptcy deal really isn't so bad."

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