Bush says no bailouts for automakers
In the wake of GM's restructuring announcement, some observers are beginning to talk about government assistance to get automakers through tough times. President Bush has quickly shot down the idea of assitance for US automakers, saying that the government shouldn't be "bailing out companies." GM spokesman Greg Martin said the General isn't looking for a free pass from Uncle Sam, instead insisting the company is going to take care of itself.
While it's nice to see GM taking care of its own problems, there really isn't much else the Detroit automaker can say. Admitting that it needs help would be an admission of doom, which would further deplete its stock while signaling to customers that bankruptcy is near. A company in bankruptcy protection can go under, and companies that expire don't (theoretically) honor warranties or have parts available for repair.
As for President Bush's comments, it deserves noting that few industries are subject to more government oversight than the automotive sector, and no industry is more vital to reducing America's reliance on foreign oil.
[Source: Detroit News Photo: Getty/Luke Frazza]
Reader Comments (Page 1 of 4)
criley 8:12AM (7/16/2008)
Really. No government bail outs for companies?
What about IndyMac bank? Freddie and Fannie Mae? Bear Stearns?
No problem bailing out banks who made pathetically bad business decisions in their mortgage departments.
Stay classy, Bush.
Reply
The Other Bob 8:15AM (7/16/2008)
I was about to say the same thing.
Injected 8:21AM (7/16/2008)
Ditto. Worst president in recent history. I'm not even sure the history books down the road will be able to refute that.
MTU 5.0 8:35AM (7/16/2008)
Yeah, who cares about the two organizations that guarantee half of the mortgage market in the U.S. (sarcasm off)
I hope GM, Ford, & Chrysler make it as much as the next guy and their contribution to the U.S. economy is not insignificant, but you cannot compare them to Freddie Mac and Fannie Mae.
mike 8:47AM (7/16/2008)
A bailout for an automaker should be illegal. Here's why. Honda spent BILLIONS on small cars like Civic and Fit to make them nearly PERFECT, they have good driving dynamics, good enough of interior, good electronics, good price, good engine, good MPG. They spend billions to get to where they are now. GM, ford and Chrysler on the other had either have no small cars (Chrysler…their smallest cars are Caliber—a semi SUV and PT Cruiser) or their small cars are so bad they do not hold a candle to other cars in the segment, Corolla, Sentra, Yaris, and others.
Why should Honda suffer by losing market shear to say GMs Cobalt that will be totally redesigned using Tax payers money? It simply would not be fair to those car companies that have acted very wisely with the product they planned to offer to the consumer.
notYou 9:01AM (7/16/2008)
Criley: IndyMac was taken over by the feds, not bailed out, because it was almost insolvent. It's going to be sold in the very near future. Didn't you see all the people taking out funds more than 100k because the FDIC (read: govt) isn't insuring (read: bailing out) them?
Freddie and Fannie are government arms not private companies (thanks to congress, they're pseudo/quasi private).
And Bear Stearns wasn't bailed out, it was allowed to fail and it's assets were sold off (that's why it doesn't exist any longer - or did you miss that?).
Get your facts straight before posting more inaccuracies from [pick your favorite dumb news network here].
xcrunk 9:17AM (7/16/2008)
GM, Ford, Chrysler...
Big oil says "have a nice day!"
GM you have EV-1 before Toyota had Prius and what did you do? You crushed them.
Big SUV's...yeah, let's build those instead. Wrong!!!
Vintage 9:20AM (7/16/2008)
It also bears mention that Honda is doing just fine, because they didn't switch their entire business model to SUVs, and still make nice cars. They also paid attention to the fuel crisis of 70s, and saw the writing on the wall.
I like Chrysler, Ford, and GM, but they can all die on a fire for being so incredibly short sighted. The worst part is this whole thing happened in the 70s, and they made the same mistakes AGAIN. Talk about dumb.
Noidor 9:31AM (7/16/2008)
Fannie Mae/Freddie Mac's losses were socialized, and so what if they fail? Let them! Look at the history, many entities failed over the decades. This fake economy needs a big flush. We need to get back to banks actually owning the loans, instead of this risk-layering nonsense.
Lehman Brothers will get bailed too...watch. I love how its CEO is also on New York Federal Reserve board. Same thing happened with JPMorgan.
blogged to death 9:52AM (7/16/2008)
The Detroit 3 need to learn a lesson...when finding oneself in a big hole and you aspire to get out of it...rule #1 is stop digging!
The Detroit 3 have gone through several stages of denial and blaming that the big culprit to their failure were themselves. Instead of reinvesting the money they made into the company they bought others (quick fix) and gave out billions in dividends to share holders who wanted money (and cared less about survival of the company). Trying to maintain this moronic "status quo" has ruined the companies and has put them where they are today. It has not been the market - it's been their blind eye approach to the changing market and preparing for the future. A major cleaning of the house is needed at GM as they are still the same coy SOBs that have no focus and it takes 30% drops in market share for them to finally see the light and a big slap on the hand for giving out loans to anyone with a pulse (yep the repomen are very hard at work these days). Chrysler and Ford have been revamped and are making improvements faster but probably not quick enough.
Now looking for which company to file bankruptcy first and cut the stranglehold on union contracts and health care, dealer franchise agreements, and cut out the poisoned moronic management that's lead them on this downward spiral (their egos are so big that they can't even blame themselves but everyone else).
Disgruntled Goat 10:04AM (7/16/2008)
If you think Honda doesn't get help from the Japanese gov't then you're just naive. Comparing Japanese industry to that in the U.S. is not an apples to apples comparison.
Travis 10:27AM (7/16/2008)
to NotYou - you're correct on IndyMac, but incorrect on the other two:
Bear Sterns - the fed guaranteed BILLIONS of Bear's worthless "collateral", enabling MS to buy them. This was a definite bailout, with the fed chipping in money to enable the sale to happen. hell, even Paulson defends it.
http://www.iht.com/articles/2008/03/16/business/paulson.php
and for Fannie / Freddie, how do you call Bush pushing a plan to have the fed BUY EQUITIES (ie, stock) from the two companies??
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNHPA3k7pAAQ
definitely don't think that the fed should be bailing out automakers, but don't think that they should be buying equities in Freddie / Fannie either...
Kingus 10:47AM (7/16/2008)
But you need to do what is pragmatic in the real world, whether or not a bailout would help in the long term remains to be seen. It would definitely help out in the short term, but you may get Chrysler and Ford to start slacking off, knowing that if things get rough theres always the possibility of a bailout.
I say let them fall if they cannot reorganize themselves. There may be some consequences in the short run, but the void they leave behind will be quickly filled by the remaining automakers. It may actually help out the 2 of the big 3 that remain.
Randy 11:02AM (7/16/2008)
There are plenty of interesting views here! Here are my thoughts!
To say the US automakers don't spend money on RnD is absurd especially when Ford had the highest RnD budget of any auto maker worldwide until the past couple of years.
To say that the auto industry does little to support this country is absurd when considering that the US auto makers alone directly and indirectly effect 6.4 million American jobs! That's a fact, not a theory!
Our President (4 out of 5 republicans and 99 of 100 democrats agree) is the biggest moron this country has ever seen in or out of office. So to think his decision is a good one when every other decision he's made to date is riddled with moron-ality is a testament to ones own intelligence.
Personally I think that tax dollars should go to things like PEOPLE and their needs! However when a government fails to enforce trade agreements, doesn't tariff imports which causes the US manufacturers to cut corners because they make $2600 less per car due to union benefits which companies like Toyota won't allow (No Unions) then the US government or whichever government fails at the stem it results in less than desirable results.
Furthermore, if 6.4 millions American workers are effected by US automakers the government should step in and help out a bit. And then tariff imports to even the playing field. (AND USE THAT MONEY TO SUBSIDIZE OIL)
It's a sad day (8 years) in American history when we give more help, more rights, more benefits and more protection to someone illegally entering the USA by way of the US/Mexican border than that of our own citizens!
Remember this when you vote!
- Randy
chrisdavis 11:51AM (7/16/2008)
When Jon Stewart reads this post, he'll be disappointed you didn't credit him.
Randy 11:56AM (7/16/2008)
"then the US government or whichever government fails at the stem it results in less than desirable results."
then the US Gov or whichever should step in and help.
Daniel 1:23PM (7/16/2008)
Just a thought. GM (and Ford and Chrysler) may want to consider building some stuff that people actually want to buy?
Then again, maybe that is asking too much?
rs 2:22PM (7/16/2008)
Not to mention within days after 9/11 Bush got Congress to give $15 billion to the airline industry. It was so soon after 9/11, it wasn't even determined yet how the airlines were going to be affected by the attack. Yet he just gave them the money anyways.
blogged to death 2:44PM (7/16/2008)
"If you think Honda doesn't get help from the Japanese gov't then you're just naive. Comparing Japanese industry to that in the U.S. is not an apples to apples comparison."
The reason why the D3 is in this mess is not b/c of Japan. The D3 would have faltered regardless as another company would fill in the void from VW to Hyundai / Kia (which has grown by leaps and bounds). The D3 also get helps from our gov't through tax breaks, bailouts such as for Chrysler, to CAFE loopholes for E85 trucks which give them a 25mpg rating on a 12mpg Explorer. Imagine how worse off they would be if it was still the D3 owning 80% of market share today and with no competition in small cars they'd only sell SUVs b/c of the profit they made. You can't excuse greed and short sightedness and blame it on Japan (the tried and true excuse they've used for 30+ years). Next is the "Buy American" where the Aveo or Vibe, etc. are rebadged foreign cars or the Fusion hencho en Mexico!
Japan's gov't is highly involved with their automakers b/c they work together...just like the employees work together with their management and the suppliers work together to ensure success for the entirety of their business. Versus D3 management's antagonistic approach that everyone else is their enemy. You don't make friends nor do you survive long when you throw everyone under the bus.
Glenn 3:54AM (7/17/2008)
Ditto .. hypocrite.
That said, I'm not totally convince he actually understands what he has been prompted to say half the time.