NEW YORK, Dec. 19, 2008
Wall Street Lukewarm To Auto Bailout
Stocks Mixed As Investors Remain Unsure That $17 Billion Lifeline Will Have Lasting Impact
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(iStockphoto)
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Timeline Stopgap Measures A look at the series of government moves to try and stem the financial meltdown.
In the early going, investors cheered the government's pledge to provide General Motors Corp. and Chrysler LLC with short-term financing and sent the Dow Jones industrial average up as much as 182 points. But stocks turned lower at midday, recovered in the afternoon, and then lost ground again in the last hour of trading as initial enthusiasm over the bailout waned.
The decision to provide emergency help to carry the struggling industry into the new year comes after a $14 billion bailout for the automakers failed to make it out of the Senate last week.
The companies' cash flows have been dwindling to a slow trickle due to the weak economy, slumping sales and the credit crunch.
The White House said it will let GM and Chrysler draw $13.4 billion in short-term financing, and another $4 billion will be added later. But it attached conditions that must be quickly met — GM and Chrysler must prove viability, defined as positive cash flow and the ability to pay back government loans, by March 31. Ford Motor Co., meanwhile, is not asking for short-term assistance, but its CEO predicted the aid will stabilize the broader industry.
GM CEO Rick Wagoner said the company had much work ahead, but he was confident it could reinvent itself with the government help.
Some analysts expressed doubts.
"I think that there's a lot of skepticism about how much real reform we're likely to see, particularly at GM, given the parameters under which the loans have been made," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "There is a lot of skepticism about whether GM is prepared to do what needs to be done."
Still, the government's move staved off, for the time being, a major bankruptcy that could have sent a debilitating blow to the economy and the labor market.
Investors have been concerned about the job market ramifications of a possible bankruptcy filing by an automaker like GM or Chrysler LLC, which some analysts said could result in up to 3 million U.S. job losses. The government lost more than half a million jobs in November, and the Labor Department said Thursday that new claims for unemployment remained well above 500,000 last week. When unemployment rises, spending declines and credit deteriorates.
The White House's action Friday "prevents the collapse of a very high profile industry less than a week before Christmas," said Phil Orlando, chief equity market strategist at Federated Investors. "That's not to say that these guys won't collapse next March, but it takes it out of the headlines now, and takes the threat of an auto industry default off the table until next spring."Click here for details of the auto bailout
Click here to see details of General Motor's bailout terms
GM shares jumped 83 cents, or 22.7 percent, to $4.49, while Ford shares added 11 cents or 3.9 percent to $2.95. Chrysler is not publicly traded.
According to preliminary calculations, the Dow Jones industrial average fell 25.88, or 0.30 percent, to 8,579.11. The Standard & Poor's 500 index rose 2.60, or 0.29 percent, to 887.88, while the Nasdaq composite index rose 11.95, or 0.77 percent, to 1,564.32.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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Posted by BRdeckard at 10:22 PM : Dec 19, 2008--
You''re right, ''globalism'' started with your boy ''trickle-down'' Ronny when he busted up unions in the air-line business.
At this point I don''t care who''s to blame, I''m saying we have to reverse it less we become the movies Mad Max and the Children of Men.
Look around the world moron and you can see it already happening in the Congo, in Greece, in Iceland all because of these evil bankers that run fiat-currency in the IMF/WORLD BANK and BIS.
Your ''go along get along'' attitude stinks and should be REJECTED!
ALL MONOPOLIES LIKE AIG AND CITIGROUP MUST BROKEN UP AND PUT THROUGH BANKRUPTCY RE-ORGANIZATION NOW!!!
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Posted by doug5231 at 05:27 PM : Dec 19, 2008--
...nor should they,
it''s not the fault of UAW but ''globalization'' for driving wages down for everybody.
We should not accept a society that embraces a system that doesn''t protect the domestic economy thus our wages.
Globalization loots the economy and drives wages in a ''race to the bottom''.
Including the recent Wall St. Financial, Welfare payments Paulson just doled out-
Would equal over $60,000 each, if given to each, and every, man, woman, and child in America.
Just think ----if the Gov''''t decided to instead give each citizen a Stimulus check for $60,000 -
With no Strings attached.
I imagine the economy would turn red hot ----- Fast!!!
In Fact Overnight!!!!
Instead, Paulson threw our money down the black hole of Corporate shenanigans --
Purchasing Toxic assets -Giving Billions to undisclosed Corporations,
Some of whom are hoarding the money--
Buying other faltering institutions - and in some cases
Awarding Golden parachutes, and bonuses, to undeserving executives who ran their companies
Into the ground!!!
Its Time for a new movement .
A true grass roots Movement!!!!
Lets Call It ---
"Money for the People"!!!
Everyone Call your Representative today and ask them to
Give each Citizen a $60,000 Untaxable Economic Stimulus check!!!!!!
Recession ? ---- What Recession !!!!
That was Yesterday!!!!
Do it Today!!!!
Stop letting Wall Street Incompetents be Rewarded for Failure!!!
Its Our Money and we want it Now !!!!!!
Posted by donevis at 01:36 PM : Dec 19, 2008
Good analogy-give another shot of 1:1000 monetary epinephrine instead of 1:10,000 and yur still only going to be watching the agonal beat of a dying economy.
The stock markets continue to be outrageously overpriced given the realities of the economy. The problem is clearly that the endless bailouts and other absurd actions in Washington have totally distorted the fundamentals of market operation.
In reality, the Washington actions have set up the economy for continuing disastrous results for a long, long time. Bailout Bernanke and the feckless Fed now have accumulated over $2.2 TRILLION in debts to bailout everybody but my grandmother - but they REFUSE to say where the money went. (Bloomberg and other organizations have file FOIA requests for this info- all have been turned down.) The $700 Billion TARP has been a total failure - the money has gone principally to Wall Street pals of Paulson (who couldn''t have seen that coming?) And the marxist drug-addict plans to waste another TRILLION on "public works" - most likely monuments to himself on every street corner. And, if you can''t figure out who will actually pay for all this, your head must also be up bailout fantasy land.
What is the "bailout exit strategy"?
"Irrational exuberance" has been replaced by "bailout insanity".
"other" 350 Billion, main street is laying off in massive strokes. We had another 60 get notice today.
A local oil company is very quietly laying off hundreds. Nothing is helping main street.
Absolutely disgusting. Enjoy your christmas on my tax dollars, dont worry about me be happy...
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- President-elect Barack Obama praised the Bush Administration''s decision to bailout General Motors Corp. and Chrysler LLC, but said the automakers must end "bad management practices."
"Today''s actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers. With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together -- including labor, dealers, creditors and suppliers -- to make the hard choices necessary to achieve long-term viability," Obama said in a statement."
Posted by helloall34 at 12:25 PM : Dec 19, 2008
Dems control Congress, drooler.
ON VACATION..........................and ............................ GETTING A PAY $4700 PAY RAISE.
How does everyone like the job this Democrat Congress has done with economy since taking power two years ago? .....................(insert eye roll)
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