Washington Considering $25 Billion Loan Handout For U.S. Auto Makers

What do you do when your industry starts to go belly up and you can’t make enough revenue to stay afloat? If you’re a short-sighted U.S. auto maker, you beg the government for $25-50 billion in immediate, low-interest loans in order to retool your plants, so you can start producing the hybrid cars you should have been planning years ago.

The U.S. House of Representatives is considering loaning at least $25 billion to GM, Ford, and Chrysler, possibly as part of a second economic stimulus package. If so, they’ll have to move fast. Congress will go on break at the end of this month and may not reconvene for the rest of the year.

“House leadership weighs loans for automakers” [Reuters]
(Photo: Getty)

Comments

Edit Your Comment

  1. junip says:

    omfg, how many companies are we going to bail out?

    • ELC says:

      @junip: I agree – if companies keep getting bailed out, they don’t learn anything. ALL this does is make it LOOK like the govt is doing something – saving jobs, etc, etc. But the long term effects of this are worse.

      • MelL says:

        @ELC: I have to disagree a little – they do learn: that they can go on, business as usual, because they are deemed too big to go under. Once a company gets so large, they are essentially guaranteed, it would appear, that the government will come running to save them from the competition.

  2. INsano says:

    Relax, it’ll only be the irresponsible ones. Oh.

  3. katbron says:

    Hey – my hand is up. I didn’t have a plan for new business and my largest client walked out the door. Can I get a bail-out?

  4. chiieddy says:

    Didn’t the government already bail out Chrysler in the 70s?

  5. howie_in_az says:

    I should really open a business; I wouldn’t have to do anything and could hit up the government for money all the time. Forget all this ‘free market’ nonsense, I needs to get paid!

  6. ARP says:

    The automotive and airlines companies know this is an election year and are taking full advantage of it. Nobody is going to vote to put people out of work in a swing-state like Michigan.

    I’ve resigned myself to the fact that we’re going to make this loan. At the very least we should say: 1) Its for retooling plants for higher efficiency cars and 2) Officer pay is frozen and no bonuses.

  7. CMU_Bueller says:

    Maybe if Ford would bring their 65 mpg Fiesta to the US, they wouldn’t need a bailout.

    • MadameX says:

      @CMU_Bueller: Amen. Bring on the European diesels. All the auto makers think they know what Americans want: bigger cars with more horsepower.

      Guess what? Our “wants” have changed.

    • GearheadGeek says:

      @CMU_Bueller:
      @MadameX:

      Diesels are NOT the be-all, end-all solution. They’re more efficient in miles-per-gallon terms, but they cost more than an equivalent gasoline car, and diesel costs more in the US these days. Also, if lots more people drove diesels, the price of the fuel would go up even more.

      Diesels in the right applications (especially for people who do a lot of highway driving), hybrids of various configurations where appropriate (buses, cars people drive in cities or in traffic, delivery vehicles, etc.) HCCI is an interesting long-term option… engines that run like a gasoline engine under high-output conditions, but use lean-burn compression ignition in steady-speed cruising situations. They can burn regular gas, have fewer emissions issues than pure diesels and offer great fuel economy.

      We need a shotgun approach, not a single-target sniper.

  8. Canino says:

    I vote no.

    I wonder what the fallout will be when people finally realize there aren’t any more “US” car makers. I used to have a GMC truck that was built in Canada. I now have a Toyota truck that was built in California.

  9. everfade says:

    This if pretty f*kn ridiculous! If you make bad business choices then you pay the price for it. I’m so fed up with our government helping out corporations and business but spitting in the face of their citizens.
    Live by captialism then you die by capitalism.
    *venting*

    • atypicalxian says:

      @everfade: @thnkwhatyouthnk: Well said. Although the unions aren’t helping.

      • katylostherart says:

        @Secret Agent Man: i mean, why pay an american a reasonable wage when you can just pay a mexican an incredibly low but legal one? that way you screw over american by taking away their jobs and foreign workers by making them legal slaves! and all at the same time!

        • MayorBee says:

          @katylostherart: How does that screw over foreign workers? If they don’t like the job, they’re not being forced to take it, right? If the job is there and they take it, isn’t it the best one there for them? This isn’t a Wal-Mart situation where a car company moves into a Mexican town and puts all the other car companies out of business. This is adding more jobs to the Mexican town that people will take. I do agree, it does screw over the Americans that have their jobs moved south of the border.

          • katylostherart says:

            @MayorBee is getting what plants crave: it screws over foreign workers by still not allowing them to have a real living wage. it gives them a better job, but not a good job and not the same benefit level that human beings as a whole deserve for their labor.

            • MayorBee says:

              @katylostherart: But isn’t it better than no job at all? If auto companies had to pay what they would have paid an American worker, they wouldn’t have moved factories in the first place.

              Additionally, government supported social safety net programs are much more pervasive in the US than in Mexico. If you’re without a job here, you have a chance of getting some help (depending on your circumstances). In Mexico, however, all you have to depend on is your friends, family, and/or neighbors if you’re in the same situation. If you have a whole community that’s not earning any money, you don’t have a lot of help at all.

              • katylostherart says:

                @MayorBee is getting what plants crave: “If auto companies had to pay what they would have paid an American worker, they wouldn’t have moved factories in the first place.”

                kinda hit the nail on the head didn’t ya?

                “If you have a whole community that’s not earning any money, you don’t have a lot of help at all.”

                that’s the thing, we’re treating other people in our region of the world as if they’re not part of our community and like their wellbeing doesn’t affect ours. it’s not as if we’re this closed economic system floating in between two oceans. moving the plants across the borders created jobs in other places at the cost of jobs here. that in turn will eventually hurt the places where the jobs moved. it creates a bit of a wealth vacuum. as we become unable to purchase outsourced products the companies move to even cheaper shores to make up the difference between cost and earnings. then those new plants that were set up are in the same position we are.

                if we’re going to have foreign labor trade it needs to be on the same terms as domestic labor trade. paying a honduran 20 cents where you’d pay an american $5 screws over everyone. and if the auto industry is asking for a loan of this size, the screwing over has apparently reached the top tiers.

                • MayorBee says:

                  @katylostherart:

                  “If auto companies had to pay what they would have paid an American worker, they wouldn’t have moved factories in the first place.”

                  kinda hit the nail on the head didn’t ya?

                  Right, but then there’s nothing to talk about, and that’s no fun. :)

                  I’m not in favor of moving the jobs by any means, but the disparate governments do create a semi-closed economic system. It makes it harder to affect change in either system, but not impossible. I think the jobs that were moved did raise the standard of living for the people that took the jobs. These people now have more money to spend, prices for goods go up, employers can and do pay more, and the cycle repeats. That’s good inflation, with the influx of new jobs being a catalyst.

        • m4ximusprim3 says:

          @katylostherart: I see where you’re going there! And once people stop buying because all of the companies exactly like us stopped paying americans, we’ll ask the government to pay us out of those same people’s pockets!

          wait… what?

          • cf27 says:

            @MayorBee is getting what plants crave: Most car jobs have not moved across the border, but the have moved South, into states like Alabama, Kentucky, Tennessee and South Carolina. GM, Ford & Chrysler’s previous dominance has been replaced by Honda, Nissan and Toyota.

            I see no reason to bail out Detroit or any car company. There’s no reason the US government should be picking sides in the car marketplace. Sure, a lot of people would have to find new jobs if GM folded. But, that’s a hallmark of a dynamic economy — the death of old companies that couldn’t compete and the birth of new companies that can.

            Unfortunately, with Ohio and Michigan being swing states, these loans are almost a sure thing. The best that can be hoped for is that the bills will stall long enough to get past the election, and then they’ll be voted down.

    • Notsewfast says:

      @everfade:
      I agree, putting all of my investment desires aside (not that I would buy ANY automaker’s stock) It is a little troubling that US automakers are just “seeking highest possible profits” when they move their plants to Mexico, but as soon as the going gets tough they want a bail-out from the very people the have spited.

      I’d be interested to hear what the people of Flint, Michigan have to say about whether or not the big three should be held afloat.

      While I don’t doubt there would be major economic impact from automaker failure, we live in a free market and other automakers will either move in to fill the void, or better companies will rise from the ashes.

  10. squatchie44 says:

    Sweet, maybe somehow that Chevy Volt that i am trying to budget for now to afford when it goes on sale in 2010 will be closer to $27-30k than $40k…wishfull thanking perhaps.

  11. So, we have a free market, but we bail it out when it falls apart? I’m pretty sure that’s an oxymoron.

    • Rectilinear Propagation says:

      *sputters in impotent rage*

      @thnkwhatyouthnk: Quoted for truth.

      Why should anyone even consider buying a Ford or GMC car if they get this bailout? If taxes are used to cover the loan the government will need to make to bail them out then in a round about way they’ve already gotten paid by everyone in the country.

  12. SkokieGuy says:

    And since our government has a staggering deficit, in reality, it will be foreign money.

    So potentially Middle East oil money will help prop up the US government to help us prop up the domestic carmakers who make less fuel efficient vehicles that keep us dependent on Middle East oil.

    Rinse, lather, repeat.

    I have no problem with the car manufacturer’s dying or being bought out. Since most of the “Foreign” carmakers operater US plants, how long till the foreign automakers employ more US autoworkes than the US companies?

  13. yagisencho says:

    They’re calling for ‘loans’, but do they ever intend to pay us back? Welcome to the USSA, comrades!

  14. DjDynasty says:

    I want an electric car that I can use for around the city, range of 200-300 miles on a single charge that can haul around a 300lb fat man without much strain!

  15. katylostherart says:

    or they could start learning from other automakers in the world and make products that last, that are clean and that people want.

    • BrianDaBrain says:

      @katylostherart: Hear, hear! Eventually our government will get it that money does not grow on trees and you can’t just keep handing out money to big companies that are on the verge of going under. Here are some ideas for said big companies:

      1. Cut your high level management salary budget. A good place to start is with the CEO.

      2. Stop spending so much on advertising. Car companies waste billions of dollars on commercials that could be better invested in these so-called improvements they want the loan for. Besides, I think everybody knows what Ford is.

      3. Start making quality products that last a long time, are efficient, and look good. Just like, oh wait, those Toyotas and Hondas that actually continue to sell well.

  16. juri squared says:

    GAH. Let some of them die. If *I* could see this coming, they should have seen it, too.

  17. mike says:

    What about those car companies that lended responsibily? Why can’t they get free money?

  18. stupidjerk says:

    Dear US Government:

    I’ve done some terrible things. I’ve been letting myself go since the 1970′s by building inferior quality and inferiorly engineered & designed products while paying no attention to the need of this planet as a whole to step away from fossil fuels.

    Now, my short-sighted disregard for building a quality product, with the best interest of the consumer, the planet, and our own longevity clearly not in consideration…I need your help. A small loan of about 40 billion dollars should be all we need to start over from the ground up. And if it doesn’t work, you can just tax the shit out of your citizens.

    Thanks in advance,
    the US auto industry

    p.s. please don’t let us suffer the consequenses of our own mistakes

  19. solidstate42 says:

    let’s be fiscally irresponsible and fundamentally inept knowing that all will be well. absolutely amazing!

  20. cubejockey says:

    K-cars for everyone!!!!

  21. laserjobs says:

    GM is not a car company anymore, it is a financial company. So maybe a bailout is warranted on saving our banking system.

  22. snoop-blog says:

    Well the government has to bail out oligopolies that go belly up, or the consequences would be catastrophic. If you didn’t think that the Repulicans were already in bed with the automakers anyhow, you’re crazy. The reason they aren’t producing the cars we as consumers want (fuel efficient) is because they are being told they can’t by politicians. We rely too much on gas to make an affordable to the masses 70mpg vehicle. You notice all high mileage vehiles are pretty much on backorder? They don’t want us to abruptly and dramatically reduce the amount of oil we consume, despite what they’re telling us. In fact, republicans answer is to drill more oil, which still doesn’t solve anything.

    If anyone actually believes that garbage ford is spewing about their 70mpg diesel fiesta is far too gullable.

    • @snoop-blog: Diesel Fiestas are real: It’s the Volt that is vapor!

      The US automakers need to (in corporate terms) “take ownership” for
      their lack of foresight. They have been on the same path of big SUVS
      for the last 15 years, and have not had any innovative products. It’s
      their fault – not the taxpayers’. This bailout is unamerican and
      represents a “nanny state” more than what makes the US great.

    • mike says:

      @snoop-blog: I don’t know if I buy the whole “the government wants us to use more oil purposely.” First off, since most of our oil is from foreign states, it’s strategically a good idea to decrease our reliance on them.

      Our thirst for oil doesn’t come from the government; it comes from consumers. No matter you politics, people will vote with their $$. And so far, the “green” politicos have lost because the majority of people are unwilling to pay more for a product, just because it’s “green”. The only people who do pay more are affluent, but are going to get taxed under Obama’s plan so will purchase cheap stuff again shortly.

      Comparitively, from start to finish, oil is cheaper than any other fuel we have. Until any of the alternatives are finacially viable, this will continue and the average american will continue to purchase oil.

      • katylostherart says:

        @linus: it’s not cheaper than all of them if you discount the fact that it’s already established and that’s the one of the largest factors in its “cheap”ness.

        sure it takes time and money to outfit solar and wind stuff or even nuclear. but it’s not like development of the combustion engine was a free or cheap process. it took a hundred years to get to this point and it had to start somewhere. when it started it was largely unaffordable for most of the population but now it’s pretty common place in most countries (at least industrialized ones).

        i’ll agree money does the talking regardless of politics. maybe it’s just wishful thinking that people will start thinking about prevention for the future while they’re filling up their tanks. you have to start somewhere. the alternatives are financially viable they just have to get off the ground into the maintenance stage of technology like oil did. oil will have exhausted its potential soon enough.

  23. viqas says:

    the government will benefit out of this

    Its not like the airline industry

  24. axiomatic says:

    Let the US auto industry fail. It needs a reboot anyway. There is not a single product they make that I would ever want. Corvette / Viper included. They just can’t even compete in the same league with any import.

  25. CMU_Bueller says:

    Privatize the profits, socialize the losses. Isn’t the capitolism great?

  26. Also, I’m going to laugh and laugh and buy an Alfa Romeo when they
    return to the US AND set up US factories because the Euro is so strong.

    [www.autoblog.com]

    [www.leftlanenews.com]

  27. SkokieGuy says:

    If the government doesn’t bail out the auto industry, they will likely be purchased by others. So Toyota buys GM, so what? Toyota will likely continue to keep the US factories humming and who cares what badge is on the exterior of the car?

    Our major institutions (airlines, credit cards, auto, media, healthcare, electronics) are failing in large part because of the policies of our government.

    If you’re unhappy about jobs going to Mexico, then remember that when you go to the pols. One candidate thinks NAFTA and CAFTA have helped the country and he wants to strengthen and expand.

  28. davebg5 says:

    Any such government bailout should include the following provisions:

    1) Any executive making $1 million+ in compensation will automatically receive a 25% reduction in pay.

    2) Any executive making $10 million+ in compensation will automatically receive a 50% reduction is pay.

    3) If the company determines that they need to make layoffs after receiving a taxpayer funded bailout/loan (within a pre-determined amount of time from receipt of said funds), then there must be an equitable ratio of management to non-management types who get the pink slip.

    On a side note, does anyone want to come over my house after school to ride my unicorn and play hide and seek with the leprechaun my mommy bought me?

    • m4ximusprim3 says:

      @davebg5: I would go farther:

      Anyone making over $300,00 for the last two consecutive fiscal years is now compensated at the mean rate for the entire company (probably somewhere around 65K), until the company is financially solvent again.

      See, the whole thing is, you have to motivate. These people speak money language, so you have to preach in a language they understand.

  29. British Benzene says:

    I screwed around at work for the last 5 years and now I got fired, I can have bail out?

    How much of that money will go back to political campaigns during campaign season?

  30. zentec says:

    Living deep in the heart of the American auto industry (SE Michigan), I’m prepared to take the punishment of a failed auto industry. I don’t work in the industry, but the collapse will affect me greatly. And I say bring it on.

    The problems of US automobile manufacturers are long and deep, and they’ve dug every inch of that trench themselves.

    For starters, they’ve alienated the middle-age customer like myself. We remember when there wasn’t competition, and the domestic brands only had to go out to the new car lot, peel off the sticker and put a new one on when they wanted more money. The car was lucky to make it 4 years unless you gave it especially stringent care and feeding. I remember the post-Japanese invasion days and they were not any better. After all the cracked heads in GM cars, air conditioning in Fords that maybe made it two years before a $1,500 repair and Chrysler vehicles that had significant body rust after 3 years, I’m done with you. GM, Ford, Chrysler, you’ve burned every ounce of goodwill and short of a miracle, I’ll stick with my Hondas and Toyotas. I don’t earn a doctor’s pay because I’m not a doctor. I need a car to last 8 years or more. Ford, GM and Chrysler didn’t offer that in the past, and I just can’t take the chance.

    I’m sorry to the workers who will lose their jobs. But despite your pleas with “Out of a Job Yet? Keep Buying Foreign” stickers and car magnets, YOU PEOPLE liked to brag about how little you worked and how much you made. I’m not stupid, I know where the money comes from and I’m just not about to take less quality for my money. This rings home particularly true when I see you in Target buying cheap imported goods — while your sticker clad truck sits outside in the parking lot. Yes, it’s going to be tough. Welcome to the world I navigated in 2000, my wife in 2004 with outsourcing, job cuts and a complete career retooling by going back to college.

    Sorry friends, neighbors and relatives, but that’s the sad economic reality. When it was all fine and well for YOU to spend your money how ever you saw fit (much to the chagrin of US textile, TV, consumer electronics employees), let me just say that I have no problems doing the same when it comes to buying a car.

    We’re about to see a monumental shift to the middle class in my area; if you want to be paid like a doctor and live in their neighborhoods, you better plan on not doing it while working in an auto plant. Better idea is to just become a doctor.

    Bail out the US auto industry — in bankruptcy court, just like every other business.

    • m4ximusprim3 says:

      @zentec: I agree completely. Honestly, I don’t even care if they bail them out- I just want to see the labor unions disbanded and the totally irrational pay scale demolished.

      Why does ford have to move to mexico to try to stay afloat while Honda happily churns out cars in newport beach, california? The answer, mi amigos, is unionized labor in an era when the protections they provide are no longer needed.

      • Orv says:

        @m4ximusprim3: If unions disappeared, do you really think all the worker protections they won would remain? Have you noticed that, as unions have weakened, middle class wages have stagnated and benefits have deteriorated? Do you think that’s just a coincidence?

  31. sketchy says:

    All this talk about forcing executives to take massive pay cuts to get loans is idiotic. The execs would scoff at the cut, walk, and get a nice position at another company.

    Screw retooling for hybrids and electric cars, retool for buses and trains and build a real infrastructure rather than millions of miles of asphalt (another petroleum product). If the U.S. Government is paying for it, let it benefit all the taxpayers. Just buy the auto manufacturers and nationalize the whole mess.

    Alternately, instead of loans issue ‘car bonds’ and really let the market decide if it’s an industry worth saving, or that can be saved.

    • davebg5 says:

      @sketchy: Getting many of the execs to walk is kind of the idea. They were dead wood who got these companies into this problem in the first place. I could think of worse things than seeing some no-talent assclown of a CEO step down in disgrace b/c he can’t get all this free taxpayer money to clean up a mess of his own creation/perpetuation unless he takes a massive pay cut.

  32. bsalamon says:

    so companies get billions of dollars of low interest loans, while college and grad students get stuck paying off loans whose interest rates are at best 6.8%…am I missing something?

  33. RStewie says:

    Part of me says let them burn. They had the electric car almost a decade ago, and where is it now? Dead. Because they couldn’t make enough money off it. Now they’re going down, and I’m loving it.

    Another part of me says Here’s yet another major part of our economy going down the tubes, and we, as a country, just can’t afford for this to happen. I hate a bail-out, but what other options are there?

    For now, though, I’ll stick with my foreign car, and live in my foreign car plant-funded community.

  34. Tank says:

    Maybe Washington can just pass along the name of the contact in Abu Dhabi to the poor planners in Detroit, and stay the hell out of it completely. Let Detroit borrow directly, and when the wheels fall off again (pun!) they can deal with the middle eastern version of “Guido”.

    fuuuuck.

  35. Invective says:

    This is all part of the Oil Company’s plan. They’re still out there pushing drilling for oil to secure future profits, meanwhile the rest of the country burns. If I were car company manufacturers, I’d be out there screaming fowl and pointing fingers. Instead, they’ll take their bonuses, pension plans and run, while the rest of the country pays for their mistakes. Dubai is filling up with CEO’s with forced retirement pay plans, we get stuck with crappy products and the government bails out everyone except the people who need it most! A second ‘stimulus’ package was supposed to go out, but instead, the oil companies drop prices *slightly* for no particular reason and we are the ‘Great American Consumer Experiment’. Thank God for PAC money, that was genius. You can steal from Americans, give to the rich and retain your 3 day a week job. Who was it who thought of that anyway? How sweet is that!

  36. balthisar says:

    Since when is a loan a bailout? This isn’t like the S&L crisis, and not even like Freddie Mac and Fannie Mae?

  37. vladthepaler says:

    If it’s a loan, and they’re paying reasonable interest, I don’t think that should count as a handout. But then again, if the loan is so risky than no bank wants it, maybe the gvt is giving the money away no matter what they call it…

  38. Leksi says:

    The USA has become a society of more welfare to *giant corps* and less to actual working class *human beings*.

  39. warf0x0r says:

    NO!

  40. emis says:

    This is a “bail out” because no one else will give them money because their track record is failure… their model is failure… their competition is fierce…

    Basically no financial institution would touch these types of loans and the Co’s themselves can’t get “the market” to provide them capital via bonds, stock releases, etc… so they go to the government…

    This is like when your 28 year old dead beat son shows up, says he can’t make rent this month, he’s behind on his credit card payments and just lost his job… but he’s got a really good plan to turn things around, but he just needs $4,000 to make happen… except the auto industry is looking for 6,250,000x more money.

  41. sleze69 says:

    It is in the public’s best interest for the government to bail out Associated Steel. Reardon Metal is just too good and will put its competitors out of business and is hence, anti-competative.

  42. eirrom says:

    Will the government handouts ever end? $25 billion for the car companies and $50+ billion for Freddie Mac! The whole system is so messed up that it is near impossible not to become a little (or a lot) jaded about it. Can we as a nation pull out of this funk or is this our future only worse?

    I’ll get off my soapbox now!

  43. synergy says:

    I believe this is what’s called having your cake and eating it too. They can make as much money as they can squeeze out of selling SUVs and then they get Congress to pay them to overhaul their factories so they can sell what’s now popular. Nice. This is about what’s going on with the banking industry, is it not?

  44. ukthom says:

    Having just returned from England, I was amazed at not only the quality of automobiles that are on offer over there, but the variety of engines, and not to mention the mileage savings that their vehicles had. The use of a pick-up truck was so rare – they have opted for van-like automobiles based on car platforms – which not only are very versitile, but also have a lower carbon footprint and get far better mpg than your run-of-the-mill F150 or Dodge 1500 or Chevy pick-up. That said, the Big Two (sorry Chrysler, you just don’t count) have massive holdings in the European market, and are fully aware of the technology that exists to bring down the mpg in the American auto fleet.

    I say, don’t bail out the US auto manufacturers…let them solve their own problems…like the rest of us have to.

    • katylostherart says:

      @ukthom: you mean let them solve the problems they’ve already solved in europe.

      i would totally drive a ka if i wasn’t sure i’d get eaten by an escalade.

  45. chuckv says:

    Corporatism/crony “capitalism” at it’s best. Let the free market work-people who can make cars well will make cars. If Americans can’t make cheap, good cars, they’ll make something else. That money we send to the Japanese has to be spent on something else, as does the money people save by buying cheaper stuff.

  46. Bladefist says:

    Don’t blame capitalism. This Country does not participate in capitalism. The politics of the Country, and the way it’s moving, is socialist. That definitely includes Bush. I’m not bashing him, I’m just telling the truth.

    We all do better under capitalism, but this is socialist/welfare for the rich. You need to tailor your votes for people who are for free markets, and against entitlement.

    Also need to get rid of unions in the car making industry. Recent strikes have cost them millions of dollars. Who pays that cost? We do. We are the shareholders, and the auto buyers.

    • GearheadGeek says:

      @Bladefist: Pick one. We can have capitalism, but if we have true unbridled capitalism we absolutely need to keep unions. In the current market, there’s enough government regulation on safety, wage and hour standards, etc. to accomplish the real good that unions did 100 years or so ago. The unions have failed to keep up, they don’t pay attention to the economy and realize when they’re shooting themselves in the collective foot. They have a “worker is always right” attitude and don’t see that the success of their employer is good for them. You don’t seem to want the government to keep regulating much of anything… the removal of labor regulations would make unions relevant again.

      • m4ximusprim3 says:

        @GearheadGeek: Surprisingly, I agree with the majority of what you’re saying. My only question is: What do we use as collateral? These companies are so large, and in so much debt, that their assets are puny in relation to their liabilities.

        Looking at it from a pure business standpoint, as the lender (by convoluted proxy), I don’t think they’ve shown “good credit sense”, and I’m not confident they’re provide an ROI. Why not just let them bankrupt and get picked up by foriegn automakers, who have demonstrated some actual business acumen (by not failing)?

        • GearheadGeek says:

          @m4ximusprim3: I don’t think more consolidation will help the industry as a whole, and I don’t think that foreign automakers will want the brands (at least not the ones Americans in general are familiar with.)

          A HUGE part of the US automakers’ liabilities are retirement and healthcare plans and onerous labor contracts. I think part of the loan conditions should be neutral renegotiation of some of the most burdensome of the labor agreements, but that’s a horribly thorny issue. No one wants to compromise, least of all the unions (see my earlier comments about the short-sighted nature of labor union demands.)

          Remember that Ford and GM have quite successful operations abroad (Europe, South America and Australia mostly, but GM is doing well in China and has other Asian divisions. I think Ford is moving into China as well.) I’m sure that the loans can be structured well enough to offer a reasonable guarantee of payment. I don’t mean to suggest that this is likely to be directly profitable for the government, but the potential benefit is huge.

        • quail says:

          @m4ximusprim3: I’m not sure of the devilish details in this loan proposal, but I’d assume that the money would be ear marked for retooling and bringing certain cars to market. It would not be handed over to them to be used in some slush fund for whatever their whims would desire.

          A certain percentage would be successfully accounted away to areas not pertaining to the retooling. But with proper oversight, and trust me the fed accountants would pour over those books monthly, that amount would be small.

          And if one, two, or all fail? The taxpayer would own some state of the art facilities that would be sold to the highest bidder.

          Right or wrong, there’s too much national pride in the auto industry to let it go without a fight. A loan in some form or manner will be given.

  47. GearheadGeek says:

    Loan. L-O-A-N. Not a bailout, though if it’s a low-interest government loand, the terms will most likely be quite favorable. In the ’70s, the government loaned Chrysler money, and Chrysler paid them back AHEAD OF SCHEDULE. Chrysler was actually a fairly decent car company until Daimler-Benz bought and destroyed them, that “merger of equals” cost Daimler a fortune and has left Chrysler in ruins, but it happened years after the loans in the ’70s helped Chrysler turn around, and years after Chrysler paid back the loans.

    Yes, obviously the companies should have had the foresight to know exactly when oil prices were going to skyrocket… you all knew, right? Each and every one of you bought a Prius and a bicycle in the month before oil prices started to climb, right? Didn’t you?

    It may surprise some of you to know that these awful companies that have been making the stupid SUVs and full-sized trucks many of you were driving to work (alone, in traffic, taking a 7-passenger SUV or a 3/4-ton truck to a white-collar office job) also make the Fiesta Diesel greenies are wetting themselves about, along with many other practical, efficient vehicles in Europe. Ford and GM have very successful European divisions that make small, high-quality efficient cars because that’s what Europeans WANT and BUY. If Ford had introduced a high-efficiency Fiesta Diesel here 3 years ago, they’d have sold a few hundred in the entire country. The car is quite small, though well-made and offering good handling. It’s not particularly cheap for its size, and Americans are only now STARTING to learn that small cars don’t have to be junk, and aren’t necessarily inexpensive.

    Yes, the US manufacturers have a production capacity problem… too much of it is geared toward making Tahoes and Explorers. Would you rather see them make more reasonably sized cars for the US (and in some cases, to ship back to Europe because with the dollar in the toilet it’s cheaper to make them here) and employ US workers and perhaps keep US suppliers in business, or would you like to see them close up their US operations and leave us with only imported cars to choose from, keeping our trade imbalance deep in the net-import territory?

  48. cristiana says:

    This bailout absolutely should not happen, even though losing thousands of jobs would be bad, the automakers put themselves in this position. The big 2.8 have been riding the SUV wave for almost 2 decades, and made Billions on the SUV craze. They also did not spend much of their huge profits to research small and fuel efficient cars. I find it hard to believe that nobody in the company thought that gas prices would stay low, and no one thought to make a contingency plan. They simply got greedy with the enormous profits they were making.
    I did some quick research, and on Wikipedia, the article said that the profit margin for one SUV was around 10k, and it could reach almost up to 20k for the larger models. Also, on Wikipedia, I grabbed some stats for new vehicles sold, and in 2006 about 7.5 million were sold, with around 40% being SUVs and other trucks, which comes out to about 3 million SUVs and trucks. In 2006 the market share for GM, Ford, and Chrysler was 25.9%, 17.9%, and 14.9%, and even calculating that they only made 2k per SUV, that comes out to 1.5, 1, and .8 billion for the three automakers. Granted they are huge companies, but, the numbers I used are probably much lower than actual profits, plus, that was only the SUV and truck profit, they did sell millions of cars, although with a lower margin on each.
    Rather than do a bailout, the high ups who make millions upon millions a year should take pay cuts, and find other ways to fix the problems that they created.

    • GearheadGeek says:

      @cristiana: I can’t argue about the overcompensation of their upper-level execs (though some of the libertarian-at-all-cost people will, as an investor with a business degree I think the overcompensation of mediocre executives is bad for business… pay them big for success, but keep their base reasonable so that if they fail, it costs them.)

      You have to realize that these same companies HAVE put lots of research into small fuel-efficient cars, they sell them in other markets. They just can’t pick up a car on Friday that was designed for European regulations and sell it in the US on Monday. Just passing all the tests for various emissions and crash regulations would take months once the companies submit the cars for testing. Also, it’s a financial loser to import inexpensive cars from Europe right now, the low value of the dollar makes that impractical so they’re having to tool up to produce more cars instead of trucks here.

      To further complicate matters, ALL car sales have slacked off because the economy is in such bad shape. Even if they had nice, well-equipped, high-mileage cars like the ones they offer in Europe ready to go on dealer lots, sales would still be slow.

      Loans are loans… as long as it’s required that the manufacturers pay back the loans or forfeit collateral, I’m not opposed. It worked well for Chrysler, properly structured it could work well again.

  49. tricky69 says:

    Hell’s no there should be no bailout, but it’s going to happen anyway. The repubs care more businesses then people and the democrats are spineless.

  50. strife1012 says:

    How can we help GM, Ford and Chrysler, When Toyota, Nissan, and Subaru have more American employees and Factories in the US?

    Let them Fail, its good for the Economy.

    Businesses failing is like a Forest Fire, bad at first, but in the end it helps to create the Circle of Life.

  51. floraposte says:

    Heh. So old satire songs still have some legs, apparently–here’s Tom Paxton’s “I Am Changing My Name to Chrysler,” performed by Arlo Guthrie:

  52. scooby2 says:

    It is not just the leadership, you should listen to some of the UAW union workers. They feel that they are entitled to the excellent benefits and pay while being able to slack off. While 3/5th’s of my relatives and in-laws work for either GM, Delphi, or Ford, I do not think this loan/bailout should happen.

    The whole industry needs a reboot. Let them go bankrupt and either restructure or get bought out. There is way, way, way too much waste at the Big 3. Pensions and health care are the big problem. They should have stopped offering pensions and health care for life a long time ago. UAW members did not even help pay for health insurance until three years ago.

    • quail says:

      @scooby2: I’ve got to agree with you on that one, about the union laborers. At some point a mindset developed that you should get paid no matter what you do.

      A friend told me about his union days. His job got changed and he had to start work in another town and had to get on the line making cars in order to keep his pay. Long story short, he didn’t like it…yadda, yadda, yadda, and the plant’s operations manager suggests that he should take a fall and get worker’s comp until his retirement years. He didn’t do it (and I think he regrets the decision), but he’s told me other stories about he and other guys not work for days but still get paid and borrowing company equipment for personal use. And more.

      After hearing his stories I could just imagine how much cheaper my automobile could be if the percentage of the workers who played those scams could have been fired.

  53. ironchef says:

    We already are bailing that failed war out at the tune of $125 Billion PER YEAR. What’s the big deal?

  54. nerdychaz says:

    3 trillion in war debt. Hmmm… I would rather spend money bailing out failing companies than killing people with million dollar bombs.

    I’m just saying, it’s a drop in the bucket at this point.

  55. Skankingmike says:

    This is actually what the Republicans would try.. oh wait.. the Democrats are the ones proposing this….

    OMG what will the Obama people think?!?!?!

    Maybe if we had a real choice for president instead of one in the same we’d have some real change this election instead we’ll have more buyout’s of corporations first Airlines, then banks, then Car companies, what’s next? we buy out Beer companies? or maybe Kraft foods?

  56. quail says:

    I’m going to be shouted down for this but here goes.

    It is a loan that’s proposed. The automaker must pay it back with interest. Small interest, yes, but interest nonetheless. With Chrysler’s billion dollar bail out, Lee Iacoca and the others got that paid back and made the company profitable (thanks minivan). Yea, too bad it didn’t last for Chrysler, but that’s the breaks. They were bought out by Daimler (sorry, merged) and then sold again when Daimler realized that the American car market is crazy. Hmm, sounds like capitalism to me. In the end jobs were saved with Chrysler’s bail out back when and we were able to see such beauties as the Dodge Viper come to market.

    I don’t see loans to the auto industry as communistic.

  57. Grrrrrrr, now with two buns made of bacon. says:

    So wait….how does this work again? If you’re a big corporation and you succeed, you keep all the profits, and your CEO’s and high-level managers all retire to an island in the South Pacific with millions in the bank.

    If you fail, it comes out of the taxpayer’s pocket. Sure, it’s a loan, but a company that shows such ineptitude deserves to succumb to “natural selection.” If I go out and make a bunch of bad investments, horrible financial decisions and generally mismanage *my* money, nobody is going to be there to help me.

  58. bwcbwc says:

    “Borrow all you want, we’ll print more.” The auto companies will get their chance just as soon as the treasury is done printing the funds for the Fannie Mae/Freddie Mac bailout.

  59. ironchef says:

    I mean if this was Haliburton, the GOP would be SCRAMBLING and taking out second mortgages to keep them going.

  60. TVGenius says:

    Screw them. Just because they’re losing their butts to foreign companies that actually innovate and give people what they want doesn’t mean they deserve to be rewarded for it. This is just as asinine as the ongoing airline bailouts. Invest that money in infrastructure for other means of transportation like high speed rail and catch up with the rest of the world already.

  61. jp7570 says:

    Perfect – Let ‘em all go under or get bought up by the European and Asian manufacturers. GM and Ford can scream all they want about how great their cars are for mileage, but when you also figure in depreciation and their pitifully short operational life, the costs go up dramatically.

    Let Ford be taken over by Honda, GM by Toyota, and Chrysler by …..well, I guess no one wants them!

  62. Trai_Dep says:

    Hell to the hell NO. Let Toyota buy them for pennies on the dollar so future business students will nod sagely and say, “Short term profits alone will lead to ruin!”
    Besides, they export more jobs than the international auto companies import.
    Guess they wish they saved a few billion dollars they spent years past convincing US consumers that driving street sweepers were “safer” about now, hmm?

  63. MrMold says:

    Go to another country and SUVs/Compensatory Pickups are commercial vehicles. What BillyJoBobJimmyJack drives to their minimum wage job is what other nations use to repair roads and haul freight. Think of driving a PennDOT (I’se from Pennsyltucky) Maintenance truck for commuting. Yeah, it has great utility and is really safe for your progeny. Just don’t hit the long-haired, Birkenstock-wearing, literate liberal on the bicycle.

    We should not have dropouts making physician wages. That’s just stoopid. However, Henry Ford had the correct idea…pay your labour enough to afford your product.

  64. IC18 says:

    Capitalism, yet the government bails out its businesses, that whines enough. Either thats hypocrytical or we are not a free market anymore, something of a mix between capitalism and socialism.

  65. banmojo says:

    This is such bullshit. This provides a temporary bandaid to a gaping stinking infected pus filled gangrenous wound – wholly inadequate. Plus it encourages big companies to be short sighted, take dangerous risks, NOT perform their necessary duties, etc etc ETC. This is just bad bad business. This is almost as stupid as that 600$ tax refund check bullshit earlier this year. As if that wasn’t socialism wrapped in a f$#@ you note from G Bush. What an ass!

  66. lamarrn says:

    I would rather bail out an American Auto Manufacturer then to continue to dump billions of dollars in Iraq. It’s time to re-focus on our own issues at home. Furthermore, that bailout will help to alleviate our dependency on foreign oil.

  67. Sanmon says:

    If this happens, and Congress shows its face in public, then it will be time for for THE PEOPLE to take over OUR government.

    Chrysler’s Chairman/CEO is worth a BILLION or more.
    Ford’s families are worth a BILLION or more.
    GM management team can cough up a BILLION or more.

    I do not have this type of chump change to hand out! They must think we are CHUMPs.

  68. gibbersome says:

    @davebg5 [quote]Getting many of the execs to walk is kind of the idea. They were dead wood who got these companies into this problem in the first place. I could think of worse things than seeing some no-talent assclown of a CEO step down in disgrace b/c he can’t get all this free taxpayer money to clean up a mess of his own creation/perpetuation unless he takes a massive pay cut.[/quote]

    Yes, but many of these CEOs have Harvard/Yale/Princeton/Stanford degrees. Doesn’t that make them better than us?