Putting the funk in dysfunctional

Before the markets opened this morning, Pres. Bush reached into the TARP and scooped out $13.4 billion, funding short-term loans to U.S. automakers. The companies have until March 31st to demonstrate their "viability" or the loans will be recalled.

Translation:

"You're on the brink of bankruptcy -- you know it and I know it. And we both know that three months isn't enough time to prove a damned thing. So here, courtesy of American taxpayers, is some money to let you get your houses in order, so that you can file an 'orderly bankruptcy' in April, if not sooner.

"No, I don't know what 'viability' means, and I have no clue what an 'orderly bankruptcy' would look like. The next President will figure it out -- I'm outta here."

In theory, the Bush administration's "last in, first out" provision would seem to favor the American taxpayer -- that is, we'd get our money back before other creditors would see a red cent -- but it's hard to imagine how companies that haven't shown themselves to be viable would be able to repay billions in government loans.

That viability-or-bust condition also puts enormous pressure on both ends of the automakers' supply chain, which comprises, to a large extent, those "other creditors" and vital distribution channels. We can predict that the automakers, just like banks that sucked up TARP funds, will hoard the money, which could spell big trouble for upstream suppliers and downstream dealer networks.

The whole concept of "viability," defined under the loan arrangement as "a positive net present value," is itself a canard. Whatever the companies "prove" to Congress between now and the end of March would be, at best, paper viability. The arrangement does mandate that labor costs be brought into line with non-union workers at foreign automakers' U.S. plants, but U.A.W. concessions won't be nearly enough.

So what's left -- longer shutdowns? Closing plants completely and cutting more jobs? Suspending or eliminating production demonstrates desperation, not long-term viability. What's more, taking those steps would further weaken regional economies and, more to the point, consumers' confidence in the product.

The only credible definition of "viability" is increasing sales, reducing debt and turning a profit -- and none of that will happen in three months. In this economy, with American consumers reining-in their spending, the automakers have no possible shot at "viability" between now and March 31st.

That said, an Obama administration surely will find a way to further postpone the inevitable -- at taxpayers' expense, of course.