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  • Bailout for automakers?

    With the Big Three automakers strapped for cash and running on vapors, should the United States government provide them the $25 billion they're asking for? Or would it be better to just let them fall into bankruptcy and restructure? Is this just throwing good money after bad? If there is a bailout should there be strings attached? (fuel efficiency standards, alternative fuel vehicles, etc.)
    Big Three automakers beg for $25 billion lifeline
    By JULIE HIRSCHFELD DAVIS – 12 hours ago

    WASHINGTON (AP) — Detroit's Big Three automakers pleaded with Congress on Tuesday for a $25 billion lifeline to save their teetering industrial titans from collapse, warning of economic catastrophe for the nation as well as their once-proud companies if they are denied.

    Millions of layoffs would follow, they said. Even national security would be at risk.

    "Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors CEO Rick Wagoner told the Senate Banking Committee in prepared testimony. He blamed the industry's predicament not on failures by management but on the deepening global financial crisis.

    And Robert Nardelli, CEO of Chrysler LLC, told the panel in his prepared remarks: "The crippling of the industry would have severe and debilitating ramifications for the industrial base of the United States, would undermine our nation's ability to respond to military challenges and would threaten our national security."

    But the new rescue plan appeared stalled on Capitol Hill, opposed by Republicans and the Bush administration who don't want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.

    Sympathy for he industry was sparse.

    Banking Committee Chairman Christopher Dodd, D-Conn., told the leaders of GM, Chrysler and Ford that the industry was "seeking treatment for wounds that were largely self-inflicted."

    Still, he said, "Hundreds of thousands would lose their jobs" if the companies were allowed to collapse.

    Sen. Mike Enzi, R-Wyo., complained that the larger financial crisis "is not the only reason why the domestic auto industry is in trouble."

    He cited "inefficient production" and "costly labor agreements" that put the U.S. automakers at a disadvantage with foreign companies.

    Wagoner said that despite some public perceptions that General Motors was not keeping pace with the times and technological changes, "We've moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around."

    "What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."

    Failure of the auto industry "would be catastrophic," he said, resulting in three million jobs lost within the first year and "economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis."

    Chrysler's Nardelli also blamed the industry's predicament on the overall financial panic. And he sought to respond to critics who suggest the automakers seek Chapter 11 bankruptcy protection, as have some airlines that later emerged restructured and leaner. "We cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said.

    Chrysler was bailed out by the federal government once before, in 1979, with loan guarantees. The company repaid the loan, plus interest, ahead of schedule.

    Congressional leaders worked behind the scenes in an effort to hammer out a compromise that could speed some aid to the automakers before year's end. But the outlook seemed poor.

    "My sense is that nothing's going to happen this week," Sen. Bob Corker, R-Tenn., said at the opening of the hearing.

    Earlier, Majority Leader Steny Hoyer said Congress might have to return in December — rather than adjourning for the year this week, as expected — to push through an auto bailout.

    "Dealing with the automobile crisis is a pressing need. We are talking about a lot of people ... and a great consequence to our economy," said Hoyer, D-Md.

    The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.

    In the Senate, Democrats discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to tide them over financially until President-elect Barack Obama takes office.

    House Speaker Nancy Pelosi, D-Calif., and other senior Democrats, who count environmental groups among their strongest supporters, have vehemently opposed that approach because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.

    Instead, they want to draw the $25 billion directly from the $700 billion Wall Street bailout — bringing the government's total aid to the car companies to $50 billion.

    A Senate vote on that plan, which would also extend jobless benefits, could come as early as Thursday, but aides in both parties and lobbyists tracking the effort privately acknowledge it doesn't have the support to advance. Treasury Secretary Henry Paulson renewed the administration's opposition on Tuesday.

    Even the car companies' strongest supporters conceded Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape.

    "While I believe we have to have retooling going into next year, if in the short run the only way we have to be able to get some immediate help is to take a portion of that, I would very reluctantly do that — but only because I believe President-elect Obama is going to be focused on retooling and on a manufacturing strategy next year," said Sen. Debbie Stabenow, D-Mich.

    The White House said the government shouldn't send any more money to the struggling auto industry on top of the already-approved loans.

    "We don't think that taxpayers should be asked to throw money at a company that can't prove that it has a long-term path for success," said White House Press Secretary Dana Perino.
    Source: http://www.google.com/hostednews/ap/..._v1PwD94HJ9V80
    113
    Yes
    31.86%
    36
    No
    68.14%
    77
    "Every man has his weakness. Mine was always just cigarettes."

  • #2
    That will solve nothing to bail them out once more. Nothing. The Big Three are basically braindead, terry schiavo would have had better chance to come back than Ford right now.

    Comment


    • #3
      Why?

      Bailout for the Financial Industry can at least be justified somewhat. There is absolutely no justification for bailing out the auto industry.
      "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

      Comment


      • #4
        Originally posted by Oscar View Post
        That will solve nothing to bail them out once more. Nothing. The Big Three are basically braindead, terry schiavo would have had better chance to come back than Ford right now.
        Nice.
        "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

        Comment


        • #5
          Originally posted by Oscar View Post
          That will solve nothing to bail them out once more. Nothing. The Big Three are basically braindead, terry schiavo would have had better chance to come back than Ford right now.
          Please don't beat around the bushes. Tell us how you really think.
          "Only Nixon can go to China." -- Old Vulcan proverb.

          Comment


          • #6
            To clear things up

            Originally posted by gunnut View Post
            Please don't beat around the bushes. Tell us how you really think.
            I'm entitled to my opinions.

            Btw I'm shocked. Till now no one against this euthanasia. Are the Republicans ready to pull the plug?

            Comment


            • #7
              Originally posted by Oscar View Post
              I'm entitled to my opinions.

              Btw I'm shocked. Till now no one against this euthanasia. Are the Republicans ready to pull the plug?


              Free market conservatives have never been in favor of bail...I mean rescues. Much like the airline industry, we need to get a few to go out of business instead of artificially keeping them alive with tax dollars.

              Detroit area and auto worker union have been heavily democrat for...ever. If anyone is seeking a bailout, it's them.
              "Only Nixon can go to China." -- Old Vulcan proverb.

              Comment


              • #8
                Originally posted by gunnut View Post


                Free market conservatives have never been in favor of bail...I mean rescues. Much like the airline industry, we need to get a few to go out of business instead of artificially keeping them alive with tax dollars.

                Detroit area and auto worker union have been heavily democrat for...ever. If anyone is seeking a bailout, it's them.
                I'm well aware of the theory thank you. :)

                What I was questionning was the practise : you do know that its not the first rescue. And neither the Republican (Nixon) nor the Democrat administrations did abandon them when they were respectively in charge.

                Comment


                • #9
                  Originally posted by gunnut View Post


                  Free market conservatives have never been in favor of bail...I mean rescues. Much like the airline industry, we need to get a few to go out of business instead of artificially keeping them alive with tax dollars.

                  Detroit area and auto worker union have been heavily democrat for...ever. If anyone is seeking a bailout, it's them.
                  Wrong...

                  The free market practitioners like the executives, lobbyists and lawmakers (as opposed to theorists like those on WAB) are no different from socialists/ liberals when the chips are down: they all want to be rescued, under different pretexts

                  This is what a Republican Congressman from Michigan has to say

                  Rep. Joe Knollenberg (R-Mich.) told the AP, "This industry could fall down, literally, or be absorbed if they don't get something in place very soon. I think it's that severe."

                  GM actually put out a website to explain why the money they want is just a loan, not a bailout
                  http://gmfactsandfiction.com/

                  The senior Senator of Michigan Carl Levin, a democrat, has the same pleadings.

                  When it comes to free money, ideology usually goes out of the window, and its usually true regardless of ideological leanings
                  "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

                  Comment


                  • #10
                    instead of bailling them out, the governments should try to create an environment that make it easier for the automakers to turn in profits again. Energy prices and fuel efficenty are currently a huge issue, so why not lower taxes* on those cars that get good ratings. I.E. push the sales of smaller more efficent cars (which, at least in theory, should also be easier and cheaper to built for the automakers).

                    *though I don't have a clue if you have what we call KFZ-Steuer (you have to pay a tax based on the car, and type, you own=

                    Comment


                    • #11
                      bail them out, and they will do the same thing the did before, and be in deep poop years later, srangely enough import companies with factories in us, do just fine, no need to bail them out, despit the fact that domestic companies have garanteed customers, government, and fleet sales, and still they manage to fail, as we say in russian, fish starts to rot from the head, their managment and marketing sucks, whatever good r&d acheves, they screw right up.
                      "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!" B. Franklin

                      Comment


                      • #12
                        Originally posted by antimony View Post
                        Wrong...

                        The free market practitioners like the executives, lobbyists and lawmakers (as opposed to theorists like those on WAB) are no different from socialists/ liberals when the chips are down: they all want to be rescued, under different pretexts

                        This is what a Republican Congressman from Michigan has to say

                        Rep. Joe Knollenberg (R-Mich.) told the AP, "This industry could fall down, literally, or be absorbed if they don't get something in place very soon. I think it's that severe."

                        GM actually put out a website to explain why the money they want is just a loan, not a bailout
                        http://gmfactsandfiction.com/

                        The senior Senator of Michigan Carl Levin, a democrat, has the same pleadings.

                        When it comes to free money, ideology usually goes out of the window, and its usually true regardless of ideological leanings
                        The problem is you assume a politician with an "R" after his name is automatically a conservative. That's not the case. Michael Bloomberg, Ahnold, John McCain, GW Bush, all have (had in Bloomberg's case) an R after their names but they are anything but fiscally conservative.

                        You have to watch very carefully at the words I use. I have never refered to Bush or McCain as conservatives.
                        "Only Nixon can go to China." -- Old Vulcan proverb.

                        Comment


                        • #13
                          Originally posted by Tarek Morgen View Post
                          instead of bailling them out, the governments should try to create an environment that make it easier for the automakers to turn in profits again. Energy prices and fuel efficenty are currently a huge issue, so why not lower taxes* on those cars that get good ratings. I.E. push the sales of smaller more efficent cars (which, at least in theory, should also be easier and cheaper to built for the automakers).

                          *though I don't have a clue if you have what we call KFZ-Steuer (you have to pay a tax based on the car, and type, you own=
                          Lower taxes!?

                          Are you mad? We can't let these corporate fat cats make more money. We have to punish them...I mean spread their wealth to workers. We have to pass even more stringent labor laws to make sure the workers make as much as possible. We also need to pass more laws to make sure these evil corporations don't rape our environment.



                          /end sarcasm
                          "Only Nixon can go to China." -- Old Vulcan proverb.

                          Comment


                          • #14
                            what I wrote is currently being planned by our government (conseratives AND social democrats) and there are plans to make it an eu wide politic. (AND we have carwise pretty much the hardest environment laws, but despite that I don't think that you could call the German car industry weak or unsuccesful. Nor is it currently in the need of a bailout. They are (or were) making profit, but after this credit mess hardly anyone thinks it is a good time to buy a car right now.)

                            I don't really understand why the U.S. companies can be in so much trouble when they faced much less regulation and restrictives laws then ours. Seems to me that they don't have anyone else to blame then themselves, and do not really deserve a bailout (I might see it different if their problems were caused, at least to a big part, by failed government policies, but this seems not the case here)

                            Comment


                            • #15
                              Originally posted by Tarek Morgen View Post
                              what I wrote is currently being planned by our government (conseratives AND social democrats) and there are plans to make it an eu wide politic. (AND we have carwise pretty much the hardest environment laws, but despite that I don't think that you could call the German car industry weak or unsuccesful. Nor is it currently in the need of a bailout. They are (or were) making profit, but after this credit mess hardly anyone thinks it is a good time to buy a car right now.)

                              I don't really understand why the U.S. companies can be in so much trouble when they faced much less regulation and restrictives laws then ours. Seems to me that they don't have anyone else to blame then themselves, and do not really deserve a bailout (I might see it different if their problems were caused, at least to a big part, by failed government policies, but this seems not the case here)
                              Well, we can start by the generous pensions granted to long time union workers. Those retirement packages are pretty sweet (ie expensive). Then there's the high corporate tax rate. I think we are #2 in the world, right behind Japan. Of course the short-sightedness of the management. They sat on gas-guzzlers and ignored small cars for decades. Plus the stringent environmental regulations on the plant (not cars) that make it expensive to do business.

                              I'd say let them fail. Buy cars made in America like Toyota Camry and Honda Accord.
                              "Only Nixon can go to China." -- Old Vulcan proverb.

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