• Nov 13th 2008 at 1:32PM
  • 55
When Congress wants to hand out money, it apparently wants to include everybody. Barney Frank, Chairman of the House Financial Services Committee, is likely to propose a measure that lets automakers tap into the $700 billion vein of rescue dollars that's ostensibly intended for financial institutions, yet is being hungrily eyed by everyone.
CEOs from Ford, General Motors, and Chrysler will make the trek to Washington, DC, as will UAW chief Ron Gettelfinger. All will be pleading their collective case for an estimated $100 billion-plus vitamin pill. Many, not the least of whom is Treasury Secretary Henry Paulson, think that automakers should not be allowed to snag some of the cash that's intended for financial institutions. Things look bleak for all three of the brands, but can Congress be moved to offer up some money and prolong the jobs of so many Americans? Even if the automakers get the $100 billion they're seeking, when nobody's buying, it will merely turn into taxpayers funding an increasing glut of product nobody can afford to buy. Even those consumers with money and good credit are holding back as the economy delves into recession, emotional purchases are way down, and most vehicle purchases are driven by wants versus needs. Things will undoubtedly sort themselves out, but not before more pain for Detroit.

[Source: Automotive News - Sub. Req.]

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    • 1 Second Ago
      • 6 Years Ago
      Even with my small amount of stock in GM - I don't support a bailout. They have so many problems and the govt should keeps its hands off of business from ALL angles. GM has been sinking for a long time but have done nothing to change.

      I'd hate to see them fail and drag the economy further into a rut, but no matter how many billions you give them as a bailout they are going to burn thru it and come back shrugging their shoulders saying "sorry - I'm going home now" If they give them this money there needs to be massive restructuring, instant abolishment of unions, paycuts everywhere, and increased tariffs on any imported automobile.
      • 6 Years Ago
      "Even if the automakers get the $100 billion they're seeking, when nobody's buying, it will merely turn into taxpayers funding an increasing glut of product nobody can afford to buy. "

      Or just pay union workers to sit on their asses. Either way, there's no use in bailing out a company so it can maintain a service that is in low demand.

      'but so many people will lose their jobs!'

      Their jobs doing what? Taking vacations while assembly lines sit empty with the lights out?
      • 6 Years Ago
      Giving domestic automakers taxpayer money without the profound changes bankruptcy generates will preserve current sinecures, ensure future raids on the public purse and guarantee eventual corporate death. GM’s business model urgently requires rehabilitation directed toward building profitable cars people want to buy. It must replace current senior management, shutter all but the Chevrolet and Cadillac divisions, reduce the number of dealers, and trim labor costs. Only bankruptcy will remove insurmountable barriers, forgive debt, preserve needed assets and provide essential breathing room to restore productivity.
      • 6 Years Ago
      Rick Wagoner took a pay cut in 2006 as part of a plan to turn around GM. In 2008 they restore his pay and gave him a ton of stock options even though the company is on the verge of death. Is there anyone that think this was a good idea? So how the @#$% can we trust them with the taxpayer money?
      • 6 Years Ago
      Let the companies file for Chapter 11 with the "bailout money" covering the debt. Force the manufactures to reorganize dumping the pensions and health care benefits that are the anchors around their necks, also dump the UAW.
      • 6 Years Ago
      I can't believe Gettelfinger is going to this. By being there it allows Nardelli, Wagoner and Mullaly to point the finger at him for their problems.
      • 6 Years Ago
      Paulson needs to STFU, he's afraid there won't be enough left over to fill his big pockets, and those of his fat cat friends.
      • 6 Years Ago
      If the U.S. government wanted to nationalize GM, they could simply buy it on the open market for about $1.6 Billion, which is what the market is saying it's worth based on their stock market capitalization. The problem is that the company is burning through $2.5 billion per month to keep the lights on. Again, this is why nobody else is looking to buy the place now that it's so cheap, nobody thinks the company is viable given their current structure.

      Even if the market recovers in a year (and assuming these low-interest loans will keep them alive that long, which is doubtful) the company is still too large, too slow, has too many competing brands, too many dealers (though that issue is working itself out as we speak) and too many dimwitted executives running it.

      Is Chapter 11 the answer? I really don't know the ins and outs of bankrupcty law, but if perhaps some of this loan money can be used to take some really hard one-time charges to pay off layed-off workers, close a brand or two, or other decisions Wagoner and Co. haven't been able or willing make, then perhaps GM can be positioned to succeed when the market recovers. I do believe that Chapter 11 will have some other bad affects, such as scaring away the few potential buyers left out there.

      • 6 Years Ago
      Is there anything worse than being "summoned" by Barney Frank?
        • 6 Years Ago
        LOL...being asked to "submit"
      • 6 Years Ago
      Rewarding failure once again.
      • 6 Years Ago
      I'm all for injecting cash in the form of buying stock or similar vested stake, but giving money to business that has deliberately ignored market demands and drove themselves out of business... not so much.

      Otherwise I'm going to need to ask for a bailout after I buy a house I can't afford to house a Ferrari I can't afford either.
      • 6 Years Ago
      “President-elect Barack Obama is pushing Congress this year to approve as much as $50 billion to save cash-starved U.S. automakers and appoint a czar or board to oversee the companies.”

      Presumably, Obama’s “Auto Czar” wouldn’t be a hard-core car guy like “Maximum Bob” Lutz. Instead, it would likely be some sort of veteran beltway bureaucrat with a bent toward bean-counting and a bias toward the environmental, trial lawyer, and union constituencies of the OBAMAcrat party.

      Echoing Obama’s “strings attached” rhetoric, “House Speaker Nancy Pelosi called for congressional action, saying failure by one or more of the big U.S. automakers would have a ‘devastating impact’ on the U.S. economy. Assistance must be conditioned on `rigorous independent oversight’ of carmakers and restrictions on executive compensation.

      Barney Frank further opined that ``A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened.”

      The salient question is whether the proposed fix is worse than the disease.

      A federal “Auto Czar” would likely be the captive of the greeniacs and the unions. The temptation to micromanage the Detroit 3 would be overwhelming. Principles of vehicle choice would be sacrificed for the “good of the people.” Any well-founded industry resistance to draconian increases in Corporate Average Fuel Economy standards would evaporate overnight. Any return to independence for the Detroit 3 would likely take years. The damage a micromanaging Auto Czar could do to the culture of the Detroit 3 could take decades to repair.

      As for any “soft landing” of the Second Supercar Era and Detroit’s continued motorsports involvement, forgetaboutit! A liberal Naderite Auto Czar, empowered with billions in taxpayer dollars, an OBAMAista mandate, and who is more in tune with the Sierra Club than with the Rod National Hot Association would kill high-performance and factory racing deader than those metaphorical bulldozers at the end of the 1971 film “Vanishing Point.”

      Certainly the federal government should take actions to level the playing field it created between the unionless Japanese invaders and the Detroit 3. And paying back Detroit for decades of unfunded mandates and market-killing regulations by shoring up their short-term financial situation is in order.

      But a de facto nationalization of the American auto sector under an unelected dictator such as Obama’s “Auto Czar” or hamstringing the Detroit 3 from developing products consumers actually want under the guise of Nader-esque “rigorous independent oversight” is akin to using an atomic bomb to “rescue” an industry held hostage to a world that federal interference created.

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