Aid For Carmakers Stalls; Now What?

Detroit Told To Create Roadmap For Modernizing Industry In Return For Bailout Consideration

(CBS/AP)  On Capitol Hill, hope for a "sooner then expected" financial bailout of U.S. automakers faded quickly.

"Until we can see a plan where the auto industry is held accountable, we cannot show them the money," said House Speaker Nancy Pelosi, D-Calif.

The Democrats said the aid plan lacked the support to pass Congress and be signed by President Bush.

Mr. Bush and congressional Republicans had balked at Democrats' suggestion to draw emergency auto industry loans from the $700 billion Wall Street rescue fund. And most Democrats were unwilling to go along with a separate, bipartisan effort backed by the White House to temporarily divert an existing program to help carmakers produce vehicles that burn less gasoline to cover the companies' immediate financial needs.

The best Congress could offer: General Motors Corp., Ford Motor Co. and Chrysler LLC have to come up with a plan for rebuilding and modernizing their industry that's convincing enough to persuade skeptical lawmakers that they should get a federal lifeline. Deadline: December 2.

"We want them to get their act together. We want them to come up with something," said Senate Majority Leader Harry Reid, D-Nev.

"Think of us as a venture capital firm," suggested Sen. Chris Dodd, D-Conn., the Senate Banking Committee chairman. "And we're asking them, 'What are you going to do if you get this investment from us?'"

The White House criticized the delay, saying the plan to let the automakers tap the fuel-efficiency loans for their short-term cash needs should be considered.

"If there are lawmakers who want to help the automakers, and they have a path to do so, why are they going to kick the can down the road?" said Dana Perino, the White House press secretary.

So far, the companies - clobbered by lackluster sales and choked credit - have painted a grim picture of what would happen if they don't get aid. GM has said it could go under before year's end, and Chrysler might not be far behind. Ford has said it can survive through 2009, but it's unclear how much longer - and if even one company were to collapse, it could cause a cascade and devastate the rest.

"Without immediate assistance, we could see, and I stress 'could see,' a collapse of one or more of the domestic auto companies by the end of this year," warned United Auto Workers President Ron Gettelfinger.

Failure of one or more of the Big Three would be another severe blow to the battered economy - and to many Americans' view of the nation's industrial strength - and throw a million or more additional workers off the job.

With the unemployment rate soaring past 10 million, and with an additional 1.6 million American jobs tied to the auto industry, the U.S. government might not have a choice than to rescue Detroit.

"This is a situation where the economy is on its knees," said Nariman Behravesh, chief economist at IHS Global Insight, on CBS' The Early Show, "where the last thing you need is for an industry to go under, for a big company like GM to go under."

It wasn't all bad news yesterday. Congress raced to approve legislation to keep unemployment checks flowing through the December holidays and into the new year for a million or more laid-off Americans whose benefits are running out, which in the short term could be good news.

Beyond the auto industry, lawmakers said the public has little appetite for anything else that smacks of a bailout, following the backlash against the $700 billion financial rescue.

"There is a sense that we did not do a good enough job of safeguarding the use of those funds, or providing prevention against abuse. And you could not get, I believe, through either house of Congress today what some people might think was a repeat. That's why we need to take time," said Rep. Barney Frank, D-Mass.

Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. Democrats and Republicans alike want the government to get a chance to share in future profits by the auto companies, require them to limit executives' pay packages and prohibit use of the funds for lobbying or paying shareholders dividends.

In scrapping plans for a vote this week, the Democratic leaders sidetracked a bipartisan agreement to temporarily divert the fuel-efficiency funds to cover the auto companies' operations.

Sen. Carl Levin, D-Mich., said that plan had a "reasonable chance" of passing, and that the leaders' decision to delay it was "risky and unnecessary."

"We need speed. This is a very, very important moment," Levin said.

[cjs_cnet_xyz]

While it might feel good that Detroit is getting its comeupance for years of producing poor product, it is wrong to let the U.S. auto industry fail for the crimes of the credit industry.

While there are those that do not want the auto industry to have access to the 700 billion bailout. I say let them have 75 billion. The auto industry will be able to make loans for their product without the finance industry stepping in as a middle man. Punishment (in the absence of capital and loans) would be denied from the finance industry for its egregious behaviour.

Detroit has worked hard with the funds it has had. Ford offers a nifty Escape hybrid and is bringing some of its better mileage vehicles from Europe. GM offers a full-size SUV hybrid with a full-size truck hybrid and the Volt on the way. Dodge has just shown three viable concepts that look more like they are production worthy. If the consumer really values the types of vehicles they offer, they can step up with their dollars.

This industry has already been punished for the credit industry''''s abuse in the form of lost sales over the past couple years. They first lost billions by potential customers buying into the housing market(whether they could afford to or not). Now they are losing by not being able to finance paying customers. Give the U.S. auto industry a break and put the blame back on the credit industry (WHERE IT BELONGS).

[nmsuip]

The 3 Stooges showed up in DC less prepared than they would accept from their own subordinates showing up to one of their own meetings. No bailout.

"...Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. Democrats and Republicans alike want the government to get a chance to share in future profits by the auto companies, require them to limit executives'' pay packages and prohibit use of the funds for lobbying or paying shareholders dividends..."

So if Congress choses to do the socialist thing, then do it right. In exchange for funding:

-Guaranteed job retention for U.S. workers (no outsourcing or offshoring).

-Executive compensation reduced/limited to no more than 1 order of magnitude (OM) above typical employee pay level (if typical employee earns $50k, CEO total compensation no more than $500k).

-If reductions are necessary, management gets laid off or pay/benefit cuts before employees.

[jsd330]

file for chapter 7 let the chips fall where they may.
Honda Toyota and the rest of the transplants aren''t going to build anymore plants in the US.

[es48]

It is much easier and less expensive to keep 10 million people working than it is to put them back to work after they have lost their jobs.

The automakers all had plans that were working well before this economic crisis arose. They are on the verge of introducing superior, more fuel efficient and environmentally friendly products, they have significantly reduced their costs, and the union has made significant concessions to allow them to bring their labor costs on par with their foreign competitors. Unlike their foreign competitors, they did this without government assistance. The data that is being presented by the media and used by the legislators to evaluate them is outdated and incorrect. The men who managed these turn arounds earned and deserve rides on corporate jets. If they don''t get them from the car companies, they will get them from someplace else. Grow up.

They did not bring this economy to its knees and cause it to put themselves in jeopardy. The banks and the government did and we still gave them money that is not being used to create commerce. As a result, the government and the banks will be liable if the car companies are allowed to fail, not only to the car companies, but also to the 10 million Americans who will be put out of work..

http://ewebsmith.com/gov/autobailout.html

[momofdaisy]

The news stated today, the CEO of Toyota plant in Texas makes under 2M a year. The Big 3 CEO''s rake in 16M to 28M a year plus bonuses, perks, free vehicles, private jets for themselves and their wives. I think that this is a very relevant part of the financial situation.

Fire these guys and pay the new CEO''s salaries that are reasonable. Cut out the perks, bonuses and golden parachutes. That will save the companies considerable money.

Get the unions out or insist they endorse lower pay/if not, just fire the overpaid folks. There are a lot of unemployed people who would love a job.

They have got to start somewhere.

The Big 3 have raped the American consumer enough already. No BAIL OUT till major changes and better cars are available.

[niceface19]

The big three, go to hell.

[torva-2009]

Oil is the lube that keeps the American economy going...

It lubricated the consumers who are getting super screwed by the oil companies, higher prices for food, and high priced low fuel economy cars.

It lubricates the fall of the American auto industry...

It lubricates the profits used by 3rd world nations to screw over their own people and us...

Come on big oil...how about throwing us a kiss every now and then as your *** us all!

[achangenow]

It''s would be ludicious to just hand these greedy CEO''s a blank check with no strings attached. Them flying to D.C. in their private jets to beg for $25 billion was sickening as well. They idiots cannot continue to build the same cr#p they''ve been selling for the last 25 years.
Here''s a novel idea: build quality products and don''t give out executive bonuses when the company is tanking!!

[brianp55]

"Just anote ,if Gm goes down in 10 years there will be no cars produced in US,That may be fine but tell me where will people then find jobs. "

They will find jobs in the Honda, Nissan and Toyota plants being built in the US.

[foundme-2009]

What is this country coming to? The Internal Revenue Service loses to lone pro per:
http://howgbeattheirs.spaces.live.com/. Lawyers guilty of meal period violations: http://www.16lunchtime42.com. Now the auto businesses who have inflated car prices and execs salaries for YEARS want a bail out? Does that sound fair? Is anyone playing fair?

[consciousnes]

The US auto makers have had the technology to make a SUV get 40 MPG for the last 30 years.
Why don''t they you say?
Because the big oil companies make sure they have enough money to NOT do it.
It would drive the price of gas below $1.00 per gallon and you know what that would do to Bush''s home state friends excessive incomes. Check the Patent office and see who owns all the technology for these gas saving devices.

[easeup-2009]

The Big 3 kept making SUVs and big trucks longer than market forces would have suggested, because Bush got a tax break for businesses that bought SUVs.

Wrong. That tax credit started in 1996.

From a 2002 article:

"The SUV tax break is becoming a staple of advice in the accounting world, as small-business owners such as Wizinsky are advised on ways to reduce end-of-the-year tax bills.

The size of the tax break has been growing under a schedule that became law in 1996. That''s when Congress changed tax law to encourage business investment.

The scale of the tax break surprises accountants and tax experts, who feel bound to recommend SUVs and other light trucks to small-business client."

Any more bull?

[rickwar]

Politics and emotion, gotta love it.

Strip away the emotion:

GM goes to the bank faces the banker
Asks for 10 Bil (the 25 bil is between all 3)

Banker stokes chin then asks

"How much business this year?"
GM "37.4 Bil so far"
Banker "Last year?"
GM "45.1 Bil"
Banker "Tangible Assets?"
Over 100 Bil, real estate, inventory, cash.
Banker "Profits?"
GM "All divisions profitable, excluding North America"
Banker "Reason" for loan?"
GM "Retooling, smooth out cash flow due to downturn in economy, quicker product turn around for North America."
Banker "Cash Flow?"
GM "Lower than normal, yet cash still flows. Cash flow will improve next year as Delphi settlement is done and UAW takes over retirement costs and 1Mil in new shares issued."
Banker "Cash reserves at the moment?"
GM "Approx 12 Bil"
Banker "Are you willing to put up tanagible assets as collateral?"
GM "Yes"
Banker "Repayment schedule?"
GM "10 years"
Banker "So 1 bil per year repayment plus interest?"
GM "90 days before first payment, 10 years from that point"
Banker "Interest might be a little high but no prepayment penalty"
GM "Fine"
Banker "Sign here"

And that is just about the way it would go if it were not for the credit crunch. Don''t think so? It''s been done that way for nearly 100 years with the car makers.

Govenment "Did you fly your own planes here? Why do you make so much? Are you willing to walk home?" Idiots personified.

[newsjunky5]

The Big 3 kept making SUVs and big trucks longer than market forces would have suggested, because Bush got a tax break for businesses that bought SUVs. This hurt the businesses that bought them, and (maybe destroyed) the Big 3 when gas went up. Who benefited from this? The Big O. - OIL.

[txgrouch2007]

Steel, computer memory chips, television sets - now cars.

All items that WON''T BE MADE HERE anymore.

Where to the people find jobs? Ask THE GLOBALIZATION ADVOCATES. They''re the ones who took your jobs.

[txgrouch2007]

VETOED BY CLINTON THEN OVERIDEN BUY THE REPUBLICAN CONGRESS
Posted by rxzyu at 12:18 PM : Nov 21, 2008

Liar. It was "veto proof." Clinton signed it into law.

[torva-2009]

If Shrub thinks its an emergency and we need to rush money to the big 3, why not tap into the $700 billion corporate welfare pool...why divert it from a fund intended to support "more fuel efficient cars" and for that matter why are we giving the big three money for this anyway...shouldn''t their own R&D and marketing budgets be supporting new product development.

The reasons why the big three are in the mess they are in is

1) They don''t offer cars people need or want today.
2) The big three and the unions opposed any new fuel efficiency standards
3) The big three and unions'' management are feeding at the trough
4) The shareholders at the big three apparently haven''t been paying attention to what their management teams are doing, let alone how they are spending the shareholders money
5) American consumers have been buying the gas guzzling vehicles until gas went over $4.00 a gallon and then it hit them that they wanted/needed more fuel efficient cars...kinda of like asking for a lifesaver after hitting the water!

All in all, I''d say we got exactly what we asked for and now that we realize that we should be doing something we are bulking at letting our tax dollars fix things...like taking a person dying of thirst but refusing to drink the water ''cause it comes from the tap instead of a plastic bottle!

Wild!

[legacyabq]

I have an idea..

Reduce production as much as possible, temorarily..

Then, liquidate their stock of cars and trucks, slightly above cost, to turn inventory into NEEDED cash..
9000 dollars for a new car? Sign me up!
Later, they can normalize things after they trim up their business and make gas-efficient cars a bigger priority..

[easeup-2009]

JUST BLAME THE GRAMM-LEACH MODERNIZATION ACT IT REPEALED THE GLASS-STEAGALL ACT VETOED BY CLINTON THEN OVERIDEN BUY THE REPUBLICAN CONGRESS IT IS THE MAIN REASON WE ARE IN THIS MESS. HE IS JOHN MCCAINS BUDDY HE WAS THE ONE THAT WANTED TO CHANGE YOUR HEALTHCARE HE TRIED THIS BEFORE IF FOR ANY REASON ANYONE WANTS TO HUNT HIM DOWN I THINK HE LIVES IN TEXAS AND BUY THE WAY JOHN MCCAIN VOTED TO OVERIDE CLINTON''''S VETO.

Posted by rxzyu at 12:18 PM : Nov 21, 2008

Wrong board, dimwit.

[mikezembill]

JUST BLAME THE GRAMM-LEACH MODERNIZATION ACT IT REPEALED THE GLASS-STEAGALL ACT VETOED BY CLINTON THEN OVERIDEN BUY THE REPUBLICAN CONGRESS IT IS THE MAIN REASON WE ARE IN THIS MESS. HE IS JOHN MCCAINS BUDDY HE WAS THE ONE THAT WANTED TO CHANGE YOUR HEALTHCARE HE TRIED THIS BEFORE IF FOR ANY REASON ANYONE WANTS TO HUNT HIM DOWN I THINK HE LIVES IN TEXAS AND BUY THE WAY JOHN MCCAIN VOTED TO OVERIDE CLINTON''S VETO.