Wait, I thought it was supposed to be $25 billion...?

[Headless Thompson Gunner]

Apparently the Big Three now want $34 billion.  $25 billion just wasn't enough?  Funny how government payouts have a way of getting bigger as time passes...



http://news.yahoo.com/s/afp/20081204/bs_afp/usautoeconomypolitics

Big Three return to Congress to beg for 34 billion dollar bailout

WASHINGTON (AFP) – The Big Three US carmakers were to return to Congress Thursday to renew their plea for a massive 34-billion dollar government bailout to save their vital industry from collapse.

An estimated three million jobs and a potential crash of the US economy are at stake as General Motors and Chrysler warn that they could run out of cash within a matter of weeks if they are not given access to billions in low-cost, government-backed loans.

Neither automaker expects they would be able to survive if they were forced into bankruptcy protection and the ripple effects of their failure would be felt across the country as auto supplies and related companies collapse in the wake of a sudden loss of business.

Ford said it might pull through on its own and return to profitability by 2011, but asked for a nine billion dollar line of credit in case the economy worsens or one of its competitors fails.

GM asked for four billion dollars this month and another 14 billion next year and Chrysler said it needed seven billion by December 31 if they were to survive a perfect storm of a global credit crisis, falling demand for large vehicles and a global economic slump.

The fate of the key auto industry is shaping up to be the first major test of the incoming administration of president-elect Barack Obama , who has warned he is not prepared to write the companies a blank check.

Obama said he wanted to hear what the automakers had to say at congressional hearings on Thursday and Friday before committing himself to any bailout.

"We should maintain a viable auto industry," he told a press conference Wednesday.

"But we should also make sure that any government assistance ... is based on realistic assessments of what the auto market is going to be and a realistic plan for how we're going to make these companies viable over the long term."

The current White House said it was reviewing the three different plans and was open to a possible aid package, but cautioned not to expect any decisions in the coming days.

"I'm not ruling anything in or out," spokeswoman Dana Perino said.

Michigan senator Carl Levin was hopeful that a deal would be reached, telling the Detroit News that the restructuring plans presented Tuesday were getting good reviews on Capitol Hill and that Senate leaders understand the urgency of acting quickly.

"I think the reception on the plans has been good. I think people realize the plans are comprehensive and serious," Levin said Wednesday. "They see the amount of restructuring, the amount of pain that is out there."

Lawmakers turned the three chief executives away empty-handed last month and charged them with coming up with proper plans showing they would be able to repay the loans and attain long-term viability.

They were roundly criticized for letting their iconic brands crumble in the face of competition from foreign transplants, whose US plants operate at much lower costs, and failing to develop smaller fuel-efficient cars.

There was also anger that all three had flown to Washington for the hearings in separate corporate jets -- more proof of the excesses of the CEO lifestyle.

The automakers tried to reshape their image with several symbolic concessions.

Ford and GM will get rid of their company airplanes and all three chief executives will work for salaries of one dollar a year. They also drove to Washington in hybrid vehicles.

All three put forward plans to invest billions in advanced technology, shift their product mix towards more environmentally friendly vehicles and slash operating costs.

GM, which is considered to be at the greatest risk of collapse, offered the most radical plan Tuesday.

It said it will reduce its US workforce by nearly a third from the current level of 96,537 people to between 65,000 and 75,000 salaried and unionized workers by 2012 and cut the number of US plants from 47 in 2008 to 38 in 2012.

Auto workers also offered to share in the sacrifice, despite landmark concessions made last year which have taken billions of dollars in health care liability off the books of the Big Three and will bring labor costs in line with the non-unionized US plants of foreign rivals by 2012.

United Auto Workers (UAW) president Ron Gettelfinger said Wednesday the union was "willing to take an extra step to move this along" by negotiating modifications to the union's contract and delaying billions in payments to a health care fund.

Industry data out Tuesday showed US auto sales dropped 37 percent last month, as total US sales fell to 746,789 from nearly 1.2 million vehicles in November 2007.

[zahc]

Let them fail.

We don't need no water, let the...

[Standing Wolf]

Let them fail.

They did that a long time ago. What we need to do is let them finish failing.

[lupinus]

I heard on fox news the other day an even better idea.

Let them fail, along with anyone else who can't make it.  Theres 371 (give or take as I recall the number) billion left of the bailout.

Declare a three month tax holiday.  No income, SS, or other current federal income taxes.  That would cost an estimated 311 billion, in the mean time divert said remaining bailout money to cover that.  Whatever is left of the bailout money gets put other places or, better yet, not spent at all and forget the bailout ever happened.

I for one think an instant 25+% raise would do wonders to stimulate the economy. 

[Waitone]

Detroit uses the tin cup asking for a mere $40 billion give or take some change and you'd think mass faintings were afoot.  Shift back a month ago and the financial sector asked for $700 billion which later was revealed to be $1.4 trillion and the response?  Ce la vie!  Amazing!

[Headless Thompson Gunner]

Detroit uses the tin cup asking for a mere $40 billion give or take some change and you'd think mass faintings were afoot.  Shift back a month ago and the financial sector asked for $700 billion which later was revealed to be $1.4 trillion and the response?  Ce la vie!  Amazing!

There was wailing and gnashing of teeth back then, too.

[lupinus]

there was much bitched then too.  This though is another layer on the when does it end cake.  So now the people who were bitching then, are now bitching louder.  The people who were on the fence then, have now jumped over and our bitching too.

[FTA84]

There was wailing and gnashing of teeth back then, too.

Yes there was.  However, it is not like the grandstanding that they are putting the three automakers through now.  I find it amusing.

In relative terms, the finanicial district asked for $700 and got $1200.  To fix a problem, that was more or less, created by their own ignorance of risky business practices.

On the other hand, the automakers in America have been the victim of :
a) A credit crisis caused by the above making it difficult to buy a new car.
b) An overinflated price of oil causing a false demand for fuel efficient vehicles.

(Not to say they don't need improvement, but, these are the straws that broke the camels back)

They are asking for $34 and are getting ramrodded every second of it.

This is why in a previous thread I wrote that congress takes care of its friends.

I can see no logical explaination but this as to why one sector gets $1200 at the 'drop of hat' (I know it failed the first time but it didn't take long to revive it and shove it through), because they were careless, but the other sector must be paraded infront of congress and cameras to beg for $34.

Obviously, some one in the financial district has friends on the hill, and the big three do not.

[AZRedhawk44]

In relative terms, the finanicial district asked for $700 and got $1200.  To fix a problem, that was more or less, created by their own ignorance of risky business practices.

On the other hand, the automakers in America have been the victim of :
a) A credit crisis caused by the above making it difficult to buy a new car.
b) An overinflated price of oil causing a false demand for fuel efficient vehicles.

No....

The financial problem was created by Congress pointing a legislative gun at the head of the bank industry, saying "make these loans OR ELSE."  The banks would have been held accountable for "racist" lending practices otherwise and sued out of existence.

Ford/GM/Chrysler, on the other hand:
a) Have their own credit institution wings to finance vehicles to buyers not encumbered by such Congressional silliness.
b) Failed to negotiate smartly with the UAW.  They should have shut down for 6 months at a time to stop this type of union abuse that is now going to put them out of any competitive position in the market.

The UAW is throwing peanuts at this point because they know bankruptcy opens GM et. al. to scabs and free market industry/labor.  You can bet your last nickel on GM getting the hell out of Detroit and other union towns in favor of "the west."  Utah, Arizona, Colorado, Wyoming, Montana, Idaho, New Mexico.  Right to work states.

Or... possibly even Mexico or Canada.

Only at the point of killing the host does the parasite begin to withdraw, lest it create its own demise.

Michigan senator Carl Levin was hopeful that a deal would be reached, telling the Detroit News that the restructuring plans presented Tuesday were getting good reviews on Capitol Hill and that Senate leaders understand the urgency of acting quickly.

"I think the reception on the plans has been good. I think people realize the plans are comprehensive and serious," Levin said Wednesday. "They see the amount of restructuring, the amount of pain that is out there."

A little more Atlas Shrugged, please.  A little more "liberals like misery spread about equally."  I didn't quite catch that.

I worry for our country when asshats can say something like that, be quoted in print truthfully, and the bastard isn't run out of office on a pole (or the tallest tree and shortest rope found).

[FTA84]

No....

The financial problem was created by Congress pointing a legislative gun at the head of the bank industry, saying "make these loans OR ELSE."  The banks would have been held accountable for "racist" lending practices otherwise and sued out of existence.

That is a convenient scapegoat to get you foaming at the mouth, but the fact of the matter is, a great percentage of the faulty loans were given to white suburbinites that simply didn't read the fine print and/or didn't understand variable APR.  How many people on here have told stories about buying a house in the last few years and being approved for way too much? How many of those people are 'minority'?

Ford/GM/Chrysler, on the other hand:
a) Have their own credit institution wings to finance vehicles to buyers not encumbered by such Congressional silliness.
b) Failed to negotiate smartly with the UAW.  They should have shut down for 6 months at a time to stop this type of union abuse that is now going to put them out of any competitive position in the market.

The point is that their credit institutions are not large enough to handle the volume of loans they need to distribute to keep their business running.  Not to mention, this whole idea is assinine because if one company gives out loans to buy most of the products they produce, how would they pay their workers/suppliers? Loans?  And what is thier profit? They would have no profit, they gave all their cars away with balance to be paid at a later date.

Again, I agree that the UAW is a major fault here but it is not the only one.  UAW has been strangling the auto industry for years, and GM hasn't redone their contract with the UAW recently, the UAW simply hasn't alloted them breathing room for economic downturn. (If times are good, the UAW wants part of it, and when times are bad the UAW wants none of it.  Too bad a real company has to save for the up times to make it through the down times).

[Headless Thompson Gunner]

There's a halfway compelling argument for saving the major banks, given their roll in monetary policy and their necessity for the overall economy.  No such arguments exist for the automakers. 

Heck, saving the banking and credit industries probably does as much to help the automakers as the money congress wants to give them.  As long as credit markets are functioning, industry can get financing from them instead of from Uncle Sam.

And apparently Alan Mulally testified that Ford can probably survive without any bailout money.  Tell me again why we should give the money to them?

[Regolith]

There's a halfway compelling argument for saving the major banks, given their roll in monetary policy and their necessity for the overall economy.  No such arguments exist for the automakers. 

Heck, saving the banking and credit industries probably does as much to help the automakers as the money congress wants to give them.  As long as credit markets are functioning, industry can get financing from them instead of from Uncle Sam.

And apparently Alan Mulally testified that Ford can probably survive without any bailout money.  Tell me again why we should give the money to them?

From what I understand, Ford isn't asking for any money up front.  They are asking for a $9 billion line of credit from the government just in case things change.  They're arguing that having that line of credit there in case they need to use it will help stabilize their situation. The CEO of Ford even offered to work for $1/year if they ever actually have to use it.

That being said, I still don't think we should give money to any of them.  Ford will simply have to make damn sure their situation doesn't turn sour, and the rest of them can fend for themselves. Just as we can't have a free market if congress regulates businesses into extinction, we can't have one if they keep throwing life preservers to companies that can't compete.

[De Selby]

There's a halfway compelling argument for saving the major banks, given their roll in monetary policy and their necessity for the overall economy.  No such arguments exist for the automakers. 

Heck, saving the banking and credit industries probably does as much to help the automakers as the money congress wants to give them.  As long as credit markets are functioning, industry can get financing from them instead of from Uncle Sam.

And apparently Alan Mulally testified that Ford can probably survive without any bailout money.  Tell me again why we should give the money to them?

Such arguments obviously do exist for the automakers-no one believes that the big 3 can fail without disastrous consequences for the economy, as that would basically be the end of large-scale manufacturing in America.

Because the credit markets were not saved by the Wall Street welfare package, Congress will have to do something more if they don't want the automakers to sink.  It's a tough call.

[Manedwolf]

Ford is in better shape than GM.

GM's problem is their management. Wagoner is a clown and needs to leave. But he won't. Because he's too clueless to even see that he needs to.

[Headless Thompson Gunner]

Such arguments obviously do exist for the automakers-no one believes that the big 3 can fail without disastrous consequences for the economy, as that would basically be the end of large-scale manufacturing in America.

GM and Ford don't play any part in monetary policy.  And while they're important economically, their loss wouldn't be a disaster.  The loss of the banking industry is a whole different story.

Because the credit markets were not saved by the Wall Street welfare package, Congress will have to do something more if they don't want the automakers to sink.  It's a tough call.

A quick look at a LIBOR chart seems to show that credit markets are returning somewhat to normal.  Say what you will about Congress' intentions, but it does look like they're getting the results they wanted. 

[zahc]

Say what you will about Congress' intentions, but it does look like they're getting the results they wanted.

BS. Of course they want you to think that. How do you know it wouldn't have recovered any faster? Nobody can say. As soon as the first bailout passed, and the stock market dipped slightly, the first thing the government said wasn't 'it's a stupid idea', no, of course it was 'it just wasn't fast enough'.

[djw]

And the bank bailout has worked beautifully:
http://www.msnbc.msn.com/id/28065054/

But perhaps the auto bailout will be better?

[Headless Thompson Gunner]

Banks failed, the stock market is down, but so what?  That's what you expect in a down eonomy.  That's normal.

What you don't expect is for the Fed to lose control over the money supply.  That is exactly what was beginning to happen in September, and I think that's what had Bernanke and Paulson and the top party leaders so freaked out at the time.  LIBOR and other rates were spiking, despite the Fed's efforts to lower rates.

The Fed has, at least temporarily, regained control over the money supply, and interest rates now reflect the policy the Fed has set.I think Congress' actions are largely responsible for this.  It may be heresy to say so, and I sure didn't think this at the time, but I now think FedGov actually got that one right.  That's what the data shows, anyway, and I don't argue with the data.

Credit markets are once again functioning normally (more or less).  Anyone who's a safe credit risk can now get a loan without too much difficulty.  As I said before, that fact probably helps the Big Three more than the money Uncle Sam is trying to throw at them.

[MicroBalrog]

So wait. If the Big 3 die, the UAW, an amazingly powerful 'labor' (socialist/big government) lobby, dies with them?

...let them die, I say.

[Gewehr98]

I don't think it'll be that easy.  UAW is tenacious, and has their tentacles deep into America's automotive infrastructure, and I'm not just talking cars and trucks.  EMD is GM's railroad locomotive division, and even the suppliers of parts are union shops.  Companies like AM General and General Dynamics seldom catch the public's attention with respect to union-run automotive shops.

I much favor letting the Big Three reorganize under Chapter 11, but depending on whom you ask, the ripple effect covers more than just those particular employees. 

I bought a new Jeep earlier this year, and am somewhat curious if they don't get their bailout, and are forced into Chapter 11 proceedings, what happens to vehicle warranties and spare parts? 

It could get very interesting.

[De Selby]

The primacy of paper is one of the causes of this disaster.  Fixing the financial sector is meaningless if there is no economy to finance, and that is what happens when you lose major industries like, for example, the entire automobile manufacturing sector.

The Wall Street lobby would like for us to believe that paper is primary, I'm sure, but the paper isn't actually worth anything if it doesn't represent a real economy.  That is why manufacturing is at least as, if not more, important than financial services.

You're just trading cute pieces of paper if there's no resource that can actually be commanded by the money. 

[De Selby]

So wait. If the Big 3 die, the UAW, an amazingly powerful 'labor' (socialist/big government) lobby, dies with them?

...let them die, I say.

Killing the UAW would probably be the biggest milestone in the resurgence of union power in the past 50 years. 

The problem is that this is happening in tandem with the biggest welfare package in the history of the Nation.  The UAW and similarly situated workers are not going to ignore that when their contracts are broken. 

The lack of a principled stand against welfare is going to drive socialism more than anything, and the more unions and labor get told "sorry, you don't belong", the more they will organize to have some effect.  It is a losing game in the long run, because labor can always deliver more votes than the board of GM or all of Wall Street.

Have to watch out for the flipside of moral hazard-unfairly gifting money (for whatever reason) to financial houses and large corporations will be seen as just that, unfair, by the folks for whom we're all proposing a benefit cut and a union rights cut.

[MicroBalrog]

Your argument is now - if we didn't start a principled stand against socialism yesterday, we should never start?

When does the principled stand against socialism start?

Look, I am not against unions as such. As a libertarian, I believein the freedom of men to organize and to sign contracts in any voluntary fashion they choose.

But in a choice between subsidizing a giant socialist organization to the tune of almost forty billion dollars and not subsidizing it and watching it die, and thus reducing the power of socialists throughout the land, while also observing the Constitution? Guess where this Balrog is going.

[Jeff B.]

Killing the UAW would probably be the biggest milestone in the resurgence of union power in the past 50 years. 

The problem is that this is happening in tandem with the biggest welfare package in the history of the Nation.  The UAW and similarly situated workers are not going to ignore that when their contracts are broken. 

The lack of a principled stand against welfare is going to drive socialism more than anything, and the more unions and labor get told "sorry, you don't belong", the more they will organize to have some effect.  It is a losing game in the long run, because labor can always deliver more votes than the board of GM or all of Wall Street.

Have to watch out for the flipside of moral hazard-unfairly gifting money (for whatever reason) to financial houses and large corporations will be seen as just that, unfair, by the folks for whom we're all proposing a benefit cut and a union rights cut.

This "bailout" is the tip of the iceberg (like the previous packages and the coming stimulus package), they'll be back for more because they will need it.  Yes, they can adjust their mix of vehicles and push their MPG's up, but as the other car makers response, the Big 3 will continually be left outside of the loop of change and innovation and still be left with grossly high manufacturing costs.

The next goody that they (Big 3 & UAW) will drop on us will be the need to have the gubmint take over and guarantee the unfunded liabilities for the pension and benefit plans.

Folks can organize, strike, picket, whatever to their hearts content, but if the host dies, there is nothing left to suck from its corpse.  The auto industry as we know it and have known it is a dead man walking, and most realize it.  The question is, do they start passing on next month, next year or in five years?  The answer depends upon how much taxpayer based debt are you willing to flush down that toilet?

Jeff B.

[MechAg94]

Maybe we could get anti-trust legislation passed that would make labor unions subject to that rule also.