The Skinny: Automaker aid from the Feds
So here's a breakdown of what's going on in Congress concerning federal aid for U.S. automakers. A Senate bill expected to be voted on this Thursday would expedite funds for Ford, GM and Chrysler so that they could actually get the cash they need within 22 days after the bill becomes law -- should the bill become law. The $25 billion loan, paid back at an initial rate of 5-percent, would come out of the $700 billion bailout fund for financial institutions. The Senate's stipulations would be that the government receives "stock warrants or senior debt instruments to the government," similar to actions taken with banks that accessed the $700 billion. As well, top executives get no big payouts and stockholders get no dividends.The rumblings on the track indicate that unless the folks in favor can change a lot of minds before Thursday, the Senate bill has little hope of passing. That makes it even more unlikely that a House version of the bill would pass, since it has even stricter requirements. The House bill would also get money for the automakers quickly, but would establish a Financial Stability Oversight Board that would have veto power over any auto company action that would cost more than $25 million. Who would be on that board and how would they be chosen? Who knows.
Latest word is also that the White House doesn't want to take money from the $700 billion bank bailout and use it for the auto industry. It would rather speed up disbursement of the $25 billion in low interest loans that was already approved for research into more fuel efficient vehicles and let the automakers use that for their current cash needs. The White House also wants, and the Senate bill requests, that Ford, GM and Chrysler give the Treasury "a detailed plan on how the government funds requested will be utilized to ensure the long-term financial posture of the company." Cue the dramatic music, some maniacal laughter and the late Vincent Price intoning: the plot thickens.
[Source: Automotive News - sub. req'd]
Reader Comments (Page 1 of 4)
Fatima 2:37PM (11/18/2008)
ugh! Some of those companies need to fail. We should not reward them for making gas guzzling SUV's and fulgy unreliable cars no one wanted to buy!
Unless they are forced to pay of current debts AND THEN use the money for making fuel efficient vehicles and hydrogen cars THEN I would support it.
Reply
Doug A. 2:44PM (11/18/2008)
Oh yes, lets punish them for making the profitable SUV's and Trucks that the public DEMANDED for years before their sudden driving habit shifts, instead of the small cars that no one really wanted, or were willing to pay a profitable price for, until gas hit $4 a gallon.
Jeff 5:35PM (11/18/2008)
Dude are you dumb!! GM has the most fuel efficient trucks and SUVs there are. And oh ya Toyota and everyone has spent billions of dollars trying to get into the truck market because it was what people where buying!! Are you complaining about the sub-par trucks that everyone else makes??? Also maybe you don't know what you are talking about when you say the have unreliable care. The new Malibu is ranked higher than the Camary is in initial quality!! Maybe they you should read more before you open your mouth. Then how about Hydrogen cars??? GM has hydrogen car they could build today if there was a market for them and a fueling structure to support it....o ya uh...there is more to he puzzle than just building them uh!!!!
SteveRB 3:14PM (11/18/2008)
@Doug,
So in your world, there is no such thing as accountability. If a company puts all of its eggs in one basket and it blows up in their face, it isn't their fault right? Well now the public is demanding something else, face the consequences.
JF 4:16PM (11/18/2008)
Fatima,
GM and Ford make many pretty reliable cars, many of which aren't "fugly". SUV's, i'll agree with your point somewhat.
simianspeedster 4:24PM (11/18/2008)
Doug,
This is far from a black or white issue. The Japanese continued to build good, solid, mainstream cars that many people still wanted when the American companies went whole hog on trucks and SUVs. Eventually, the Japanese started building bigger trucks and SUVs as well, but (and this is important) they didn't stop building solid cars in favor of SUVs. The Camry, Accord, Civic and Corrolla were never overlooked so Honda or Toyota could build a stupid, pointless Lincoln Blackwood truck.
The American manufacturers almost completely abandoned competition the small car market. Ford skipped a whole generation of Focus cars to save a little money and Chevy continues to offer the very tired Cobalt. Only recently could the Malibu compete with the Accord and Camry and the Fusion, while decent, is just a re-badged Mazda 6.
There's nothing wrong with seeking profit, but the Big 3 went after profit AT ALL COSTS, and that's why they're in the mes they are today. They should have maintained balanced automobile portfolios, but they got greedy and short sighted.
No bailout is warranted.
-SimianSpeedster
John 5:27PM (11/18/2008)
Fatima and others who can't seem to digest all the facts, try this.
The big 3 focused on the big vehicles because that is what they could make a buck on and that's what the public wanted to buy, and what the retirement funds demanded.
The big 3 could not make a profit on small cars due to higher costs ie. UAW wages, and improving the quality of their small cars just added to the profit issue.
The big 3 proceeded to hammer out a new contract with the UAW recognizing that the world was changing and North American's didn't give a damm about sending tonnes of money to Asia.
The new contract set the big 3 on a course for more profitable operations by 2010, while at least Ford and GM put serious effort immediately into quality, efficiency, style, and profitable small cars.
A perfect storm of gas prices, housing and credit collapses then caught the big 3 in the midst of turning their big ships.
The big 3 didn't cause any of these financial disasters, and if the disasters hadn't happened, there would be no need for any bailouts.
If you want to blame someone, blame all the greedy consumers who want what they want..now, then pay for it on credit, and don't give a damm where its manufactured, or what the impact is on their future or that of their children.
It's pay up time for everyone.
If I had a vote on who pays, it would be everyone who buys foreign products, buys products they can't afford, and run up huge credit bills, or is in the UAW.
chrisdavis 5:54PM (11/18/2008)
Ah, the old GM doesn't make bad cars, they have bad customers logic.
Nick 12:40AM (11/19/2008)
@Simian
Well said. But the only problem is you apply logic to what the bailout crowd wants and they just refuse to listen.
@Jeff
Always a great way to make a point is to start calling people dumb. I get where you're coming from (insert your brand here) is the best because you think so and you're just going to call people dumb for not believing you.
So why doesn't GM do anything about their hydrogen fuel cell car??? Honda most certainly has been working far above the curve and now has many hundreds of hydrogen fuel cell cars on the roads (which is a welcome start).
Oh and how about the car magazines rating the Malibu higher than the Camary. Well that's great but why should anyone take the word from a company that takes money from the automakers to write articles.
-Proud owner of a 07 Toyota Tundra, 06 Chevy Corvette Z06 & 99 Honda Accord.
Sharone 9:42AM (11/19/2008)
JF you mean to say they make ugly and unrelible cars.
MJC 2:40PM (11/18/2008)
I live in Michigan.. I really don't think some of these auto executives get how bad this is effecting us. They need their head examined..
UNTIL the EXECUTIVES & the UNION gets on the same page.. doesn't matter WHAT we do.. it's going to suck.
Reply
happy_penguin 3:01PM (11/18/2008)
The union has already turned a page or two on pay scale. The executives haven't even opened the book.
Gregg 2:41PM (11/18/2008)
It would be better to let GM go bankrupt. It is highly unlikely a firm that big would stop operating, but once bankruptcy happens, executive salaries, bonuses, labor contracts, health benefits, supplier contracts, everything would be subject to re-negotiation. A leaner and meaner company could emerge. Giving them $$ to keep operating under old unworkable arrangements is not only foolish use of government printed money :) , but a slippery slope for every industry in trouble to come forth for a handout.
Reply
Doug A. 2:42PM (11/18/2008)
It would stop operating and millions of people would instantly be out of a job. What then?
Jj 2:51PM (11/18/2008)
In better economic times you would have a point, but letting GM go bankrupt would still probably further unsettle the American economy. It would be more a psychological effect than anything but would be a blow none-the-less.
Both of the proposals above is not the way to do it. It should be a separate package with terms that address the fundamental problems with the company’s. Poor (or poorly timed) product is only one of many factors that got them where they are.
Paul 2:54PM (11/18/2008)
Actually a firm this big, in the current credit situation, is more likely to not be able to emerge from bankruptcy. Chapter 11 might as well be Chapter 7 for them.
Gregg 3:15PM (11/18/2008)
Doug, let's just for giggles say you are right. The which is better? Millions out of a job, or many billions down a rat hole and then millions lose their jobs? The world has changed. More people seem to be aware now that resources are finite. Car sales have dropped across the board and around the world. Even if China and India. There are too many car companies and way, way too many models for the cnsumer to support. Some people are actually discovering that every manufacturer makes halfway decent rides that given proper maintenance can easily go 10 years without problems. What makes GM with its baggage so much more deserving of survival than say another manufacturer. Bottom line, some must go and everyone must get leaner. Why didn't we save the steel industry? Why did we allow most other manufacturing to go off-shore? GM can find a way to survive without government billions or it is a company that doesn't deserve to live. Period. How much more money do you think the US can print for all these debacles before our dollar becomes worthless?
Paul 3:17PM (11/18/2008)
I would take billions down a rat hole while those millions still have jobs and the economy can slowly absorb the impact of a changing world.
I don't understand why we are all letting logic go flying out the window in this debate.
BigMcLargeHuge 3:59PM (11/18/2008)
Did you just say you'd PREFER to send billions down a rat-hole and then tell Gregg he's being illogical?
How is going from NOT supporting these jobs of people (producing nothing due to low demand) to INSTANTANEOUSLY supporting them a softer blow?
Its like 1 month our rent is free and the next month its 25 billion dollars.
Randy915 5:03PM (11/18/2008)
I completely agree with Gregg. If the government lets GM go under and have private firms purchase its assets or sell it to companies like Volkswagen who's building a plant in the US as we speak and may want to expand. The workers will probably be absorbed into those deals and we move on.
The point is we have to find a way to fire the people at the top without cutting the people at the bottom so the way to do that is to let the company sink and reemerge with new management. Right now even if GM gets out of debt, what's that going to do for the industry? Building more Cobalts? I rather have the government collaborate with private firms to form a foundation for the remnants of GM and its workforce if unemployment is anyone's argument for bailing out GM.