Jack Welch On The Auto Bailout, Financial Crisis

Former chairman and CEO of General Electric Co. Jack Welch -- named by Fortune magazine as "Manager of the Century" -- weighed in on the current financial crisis, and the implications for domestic automotive manufacturing, at a recent executive forum.

From a Desert Sun article:

Welch began by lauding the government's fiscal and monetary policy moves of late, noting that there has been positive effects and activity:

"We've done a hell of a lot,'' Welch said, citing improvement in the bank-to-bank lending rate. "We're in much better shape than we were in 60 days ago."

About General Motors, he said: Don't hand any money to the automotive industry.

When Welch was pressed on GM, he quipped, "Chrysler's sponsoring this thing, so I don't know what I can say to Mr. Nardelli," but true stimulus isn't going to happen if $100 bills are dropped out of a helicopter and if corporate bailouts continue to happen.

Welch expects that, should a restructuring happen, the government needs to play the role as a debtor in possession as part of any GM restructuring.

"You can't get that much debt taken care of from the private sector today,'' he said, adding the view that because of cheap credit and zero financing, there have been so many cars produced that the market is flooded.

"We have artificially out there something like eight to 10 million cars that aren't needed,'' he said. "We have this huge overhang so this is a restructuring problem that won't be solved by giving them money."

Bailing out GM just because they're an iconic American company is not sufficient motivation, Welch says -- that's what they said about Pan Am airlines, he said.

FInally, he said that energy will be the pivot point of the next administration:

He told the more than 1,300 top executives from the world's largest private equity firms and prestigious market leading companies attending the conference that everyone needs to get to know the next secretary of energy.

"Energy is the long-term industry,'' he advised.