Obama’s auto industry task force met with GM, Chrysler and the UAW in Detroit yesterday as they wind down their fact finding process and solidify government plans. They likely heard an passionate, urgent pitch from auto execs and union reps before test driving the Chevy Volt. At the same time, we have auditors and some politicians pushing for a GM bankruptcy as the best option. We’ll know in coming weeks which course of action - Treasury assistance for auto makers & suppliers OR rolling the dice on inaction - wins the debate over how to proceed.

Sometimes when you’re close to the problem (auto suppliers’ liquidity) and know the solution (receivables!!!), it’s frustrating watching the political process unfold. That’s why seeing this interview with Rep. Gary Peters (D- MI) was a refreshing break from the norm. Representative Peters made a solid, factual case for helping the auto industry weather the short-term credit crunch in order to preserve jobs, innovation and the US manufacturing base for the long-term. His prescription for the “most livable” solution includes unlocking the liquidity contained in the auto suppliers’ receivables, thereby saving the supply chain from collapse:

As Peters rightly points out, the credit crisis is not the fault of the auto makers or their suppliers. And the do-nothing approach while suppliers are “hanging on by their fingernails” creates a “potentially catastrophic situation”. But even more significant in my mind was Rep. Peters’ grasp of liquidity as the problem and government backing receivables as the answer. Too often, we hear politicians speaking only in sentences that are short enough to fit on a bumper sticker. So the fact that there are elected officials with a firm grasp of the issues and solutions is reassuring.

At it’s core, the debate boils down to 2 options; 1) help the industry deal w/ their liquidity issues so they can rightsize their businesses and live to fight another day or 2) cut off our nose to spite our face and watch as GM and Chrysler go belly-up. Option 1 buys time and as my colleague Drew Hofler pointed out last week, is actually the more “fiscally conservative” choice on the table. Option 2 on the other hand would likely lead to what Rep. Peters “if those receivables disappear in a bankruptcy you’re going to see a cascading of bankruptcy by auto suppliers.”

The right choice seems clear to me and I’m happy to see someone in Washington gets it.

Joe Fox is a Senior Director for Ariba’s EIPP & Network Solutions. Joe Fox has over 21 years of experience in Management Consulting, Procurement and EIPP Software startups, Business Process Outsourcing, Biotech, Manufacturing and he loves vintage race cars. Joe recently re-joined Ariba after a 7 year run in startup organizations. Joe was with Ariba originally from 1999 to 2001. Joe has a Bachelor or Science in Computer Science from Rockhurst University, Kansas City, Missouri.