Mixed Views On $17.4 Billion Auto Bailout

As Supporters, Critics Debate Bush's Plan For Loans To GM & Chrysler, Canada Steps Up With Package Of Its Own

(CBS/AP)  There's been a mixed reaction so far to President Bush's promise of $17.4 billion in loans to troubled U.S. automakers.

Congressional Republicans don't like the idea of using money from the $700 billion bailout program intended for banks and other financial firms, and the union representing autoworkers says this is too harsh on its members.

President-elect Barack Obama, praised the administration's action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."

Obama will be free to reopen the arrangement once he takes office, if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.

Obama was noncommittal on possible changes but said he would "make sure that when we see a final restructuring package that it's not just workers who are bearing the brunt."

Michigan Governor Jennifer Granholm, D., said the $17 billion loan package is "a great Christmas present, not just to the automakers but to those who supply them, representing 3 million jobs across the country.

"The reality is the auto industry touches almost every sector of the economy, whether it's steel or plastics or microchips or service industries, so this industry has to survive," she said this morning on CBS' The Early Show.

In announcing the loans on Friday, Mr. Bush said that a restructuring of the companies, in order to avoid bankruptcy and to ensure their future viability, would need to be drawn up by March 31. If they failed to do so, Mr. Bush said, they would have to repay the loans immediately.

"The time to make the hard decisions to become viable is now - or the only option will be bankruptcy," he said.

Meanwhile, Sen. Mitch McConnell, R-Ky., said he has strong objections to President Bush's plan.

McConnell, the Senate's top-ranking Republican, said Friday he objects to tapping into the financial rescue fund to help bail out a specific industry.

Now that Mr. Bush has freed up the money from TARP for General Motors and Chrysler, McConnell says all the stakeholders need to be held to strict, date-specific requirements in turning around the auto sector. He says those changes need to involve labor and health benefits, and should be agreed to by Feb. 17.

Republican Jim Bunning, the state's other senator, echoed McConnell's objections. Bunning said a news release that using the financial rescue fund for the auto industry is an abuse of power.

Under terms of the loans, Mr. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year. And he called for elimination of a "jobs bank" program - negotiated by the UAW and the companies - under which laid-off workers can receive about 95 percent of their pay and benefits for years. This month, the UAW agreed to suspend the program.

The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.

The government will also have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.

UAW president Ron Gettelfinger has said he was disappointed that President Bush singled out workers when discussing concessions to be made, and that foreign auto companies would dictate the wages of UAW workers.

Granholm said the effort to restructure the automakers will require sacrifices on the part of all stakeholders, not just workers. "That is going to be a very, very tough slog, but necessary to have an auto industry in America that is vibrant.

But, Early Show anchor Erica Hill asked Granholm, can the Big Three survive without their employees making wage concessions?

"No, there has to be sacrifice on the part of everyone," Granholm said, but added, "People aren't aware that last year, the UAW entered into a very controversial contract going forward which cut in half the starting wages of those who would be employed at auto plants, from $28 an hour to $14 an hour. They offloaded all of their health care costs into a voluntary employee benefits association which was really revolutionary, too.

"They know they have to do more, but it's not just them, is the whole point. It has to be everybody who feeds into the system."


Canadian Prime Minister: We're "Doing Our Share" To Aid Big Three

Meanwhile, Washington isn’t the only source of emergency funds for the ailing automotive industry.

Canada's federal government, and the government of Ontario, will provide the Canadian subsidiaries of the Detroit Three automakers with $3.29 billion in emergency loans, the prime minister said Saturday.

Prime Minister Stephen Harper said Canada's bailout plan - the equivalent of 20 percent of the U.S. aid package - will help keep the plants afloat while the automakers restructure their businesses to retain one the country's most important sectors.

"We cannot afford, in the United States or Canada, the catastrophic short-term collapse of the Big Three automakers. The U.S. has signaled that they are not going to allow these companies to fail, and we will do our share of the North American package to see that this doesn't happen either," said Harper speaking at a news conference in Toronto.

Canada's automotive industry represents 14 percent of the country's manufacturing output, 23 percent of manufactured exports, and directly employs more than 150,000 Canadians. The country's largest industry within the manufacturing sector, it has been suffering from its slowest sales in 26 years and dwindling operating cash.

Ontario has agree to provide 1.3 billion Canadian dollars ($1.07 billion) of the total since the province alone employs about 400,000 auto sector workers - both directly and indirectly - and the industry is the mainstay of about 12 Ontario communities.

"In Ontario, we've got thousands of people and their families who rely on the auto industry to be on firm ground, so they can put food on the table and keep a roof over their heads ... No state or province employs more workers, and we're not going to give that up," said Premier Dalton McGuinty, speaking alongside Harper Saturday.

The Canadian plan will provide General Motors Canada with loans of up to 3 billion Canadian dollars ($2.47 billion) and Chrysler Canada will receive up to 1 billion Canadian dollars ($823 million). The companies will get the money in three installments, with the first portion coming Dec. 29.

However, Harper and McGuinty stressed that the government will not be handing over blank checks, saying that all stakeholders will be expected to make adjustments to reduce structural costs.

"Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country," said Harper. "They expect all stakeholders to come to the table and work together towards sustainable long-tern solutions to maintain our current production share of the North American market."

Harper's statement was applauded by Canadian Auto Workers President Ken Lewenza, who said the union was willing to work with industry to protect jobs.

"This will ensure that the Canadian industry is protected and the numerous investments governments have made over the years will continue to benefit our communities. This is a very sound decision on the part of both governments," said Lewenza, who has been lobbying the government to develop an aid package as soon as possible.

Harper also announced two additional steps the federal government will take to support the overall competitiveness of the auto industry. Automotive suppliers will have greater access to accounts receivable insurance through Export Development Canada to compensate for the reduced availability of credit. A new facility will also be created to support access to credit for consumers to improve the accessibility of car loans and dealer financing.

Similar to the U.S. auto bailout package, the Canadian aid package comes with strings attached, including a request that parts suppliers get the money they are owed, that borrowers accept limits on executive compensation, and that they provide the government with warrants for nonvoting stock.

McGuinty warned that the money will only be delivered after auto companies agree to meet conditions set by the governments.

"Those conditions include limits on executive compensations. The loans will only stay in place beyond March 31, 2009 if our governments are satisfied there are solid restructuring plans in place and under way," said McGuinty.

Meanwhile, in the U.K., British auto manufacturers stepped up pressure on Prime Minister Gordon Brown's government to deliver an industry bailout package today as a report revealed that car production slumped by a third in November.

The Society of Motor Manufacturers and Traders warned that crumbling domestic and export demand would lead to extended plant closures and job cuts as production falls.

The industry body wants the government to move quickly to restore demand and loosen tight credit conditions.

The government has confirmed it is in talks with Jaguar Land Rover's Indian owner about possible financial support.

The society says the number of cars built in British factories dropped 33 per cent to 97,604 last month. Commercial vehicle production fell 50 per cent to just under 11,000.

[jt_lancer]

More bailout cash stolen out of the pockets of the people who actually earned the money.

[davidm2902]

Do we all miss this point, when automakers (or any corporation) accept any money, from wherever, in so doing, a fiduciary responsibility is incurred, to return a profit. Is not this, the difference between a corporation, and a charity? Armed with this knowledge, it is clear what the auto industry needs, and does not need. Think, the auto industry needs sales, not money, is it not true, by giving them money, in essence, the only way they could possibly use that money, to increase car sale, would be, to pay people to buy their cars. Obviously, money is not what they need. Now, here is what the auto industry needs - SALES CONTRACTS.
Wall St., and the big three, needs a Charlie Wilson -With a $540 billion dollar a year defense budget (not including the cost of two on-going wars), can we not just Charlie Wilson our way out of this auto crisis? Gus, will a 3 year, $193 billion dollar defense contract with the big three U.S. auto makers, to convert or replace, all non-combat vehicles, to electric, natural or propane gas, (clean American manufactured vehicles), this plant (all US auto plants) can re-tool and expand, we can reduce our dependence upon foreign oil (increasing national security), work in cleaning-up the environment, expand research and funding in the development of green technologies (creating green jobs), Gus, now tell me, will this be enough?

[win4usa]

I think this just delays the inevitable. People aren''t going to buy cars from GM and Chrysler because 1. They don''t know if they''ll have a valid warranty and be able to get parts in the years to come if the companies go under and 2. People are upset about the bailout and are boycotting these companies.

[autoretiree1]

Seasons Greetings to UAW officers Ron Gettelfinger, General Holiefield, Bob King, Cal Rapson and James Settles %u2026from over 500,000 betrayed UAW retirees.
%u201CAUTO RETIREE HEALTH CARE IS THE SACRIFICIAL LEGACY COST AND THEREFORE RETIREES ARE THE PROBLEM! LET THEM DIE AND DECREASE THE SURPLUS POPULATION!%u201D

http://www.speroforum.com/site/print.asp?idarticle=16991
http://unionreview.com/insights-analysis-uaw-betrays-autoworkers

http://westfallmike.tripod.com/Page12.htm

http://michaelwestfall.tripod.com/id6.html

http://www.intellectualconservative.com/2007/08/11/interview-with-whitey-hale/

http://www.uawndm.org/ndmportal/modules.php?name=News&file=article&sid=157

http://westfallmike.tripod.com/Page14.htm

http://michaelwestfall.tripod.com/id17.html

http://www.umflint.edu/library/archives/westfall.htm

http://michaelwestfall.tripod.com/id50.html

http://westfallmike.tripod.com/

http://www.google.com/search?hl=en&rls=com.microsoft%3A*%3AIE-SearchBox&rlz=1I7GFRD&q=mike+westfall uaw&btnG=Search

[oneworldusa]

Posted by machineguy at 05:32 PM : Dec 21, 2008

--Corporations don''t pay taxes. Customers do.

[carlpers]

The $17.4 billion GM/Chrysler bailout is an avoidable mistake. Instead we should be providing a federal guarantee for warranty work if bankruptcy occurs.
The main objection is that customers may not buy GM and Chrysler cars if they believe that a bankruptcy filing is possible. The reasoning is that in bankruptcy the purchaser''s right to warranty work might be lost or curtailed.
The clear cut remedy is for the U.S. Government to issue a guarantee (really, gilt-edged security for customers). If GM or Chrysler is unable to honor any of their warranties, the U.S. Government would pay for the promised warranty work. In effect, the US Government would be issuing its own version of a credit swap.
This way bankruptcy could occur, if necessary, to have GM and Chrysler be relieved of various contractual obligations, to make them viable, instead of having taxpayers give the manufacturers $17.4 billion now and perhaps $100 billion more a few months later.
It is entirely possible that there would be no need for the U.S. Government to pay for any warranty work, but even if it did the amount would be far less than $117.4 billion.
The bailout, for the reasons announced, is just one more political fraud, and should be ended as soon as possible.
Carl E. Person
Antitrust, Intellectual Property and Civil Rights Litigator

[McHineguy]

95% of the large corporations in the US pay no taxes at all,

...

--------------------------------------------------------------------------------

Posted by Strangeworld at 05:12 PM : Dec 21, 2008

THAT IS PREPOSTEROUS!!! Please provide a credible reference for such a statement. According to the IRS, 70% of the federal tax bill is paid by corporations and the rich.

The rest of your plan is dependent on your first statement being true. It is not so lets not discuss the rest.

[strangeworld]

95% of the large corporations in the US pay no taxes at all, so the folly that taxes hurt them is a bunch of republican BS. Let''s got back to the 1950''s and raise the maximun tax rate to over 90%...the only way to reduce it would be to reinvest in the US. Business has BSed the people for so long that there really isn''t a republican party any longer - there''s the democrats, and then there''s the modern republican party that is far less fiscally responsible than the democrats. Raise taxes on corporations and the wealthy, tax the heck out of goods coming into the country, and let the chips fall where they may - I have a feeling that businesses will do just fine, and if some don''t want to do business in the US, who cares...another will start up to take their place. There''s no reason that the biggest consumer nation in the world should be spending the majority of their money on products that ultimately provide benefit only to the citizens/governments of foreign countries. Republican trickle-down economics does not work, has never worked, and will never work to the benefit of the vast majority of those living in the uS.

[McHineguy]

...
Republicans have it backwards...they want to spend tax money for the benefit of the wealthy, but whine about the expenditure of a far smaller amount on the average citizen of the US. As far as the good of our nation is concerned, we''''ve still got far too many modern republicans in office.


--------------------------------------------------------------------------------

Posted by Strangeworld at 04:37 PM : Dec 21, 2008

I am a middle class republican and I do not have it backwards. I dont want to give more money to the rich, they will take care of themselves just fine. But I do want to make it easy for corporations to stay here so we can have jobs. Raising their taxes, setting harsh rules, makes it hard for them to survive unless they only sell to Americans who all are willing to pay more for the products. Setting high pay for one group, the Big 3 CEOs and the UAW, makes cars cost more for the rest of us.

In addition, you miss the obvious point that the richest people in government are Democrats. I dont buy their pandering that they are for the working class. Its obvious to me they only want votes and power.

[jsd330]

My boycott will be not to buy from companies that got bailout money.

posted by kevinkkloste

Does that mean you won''t be doing any banking or using a credit card?

[strangeworld]

In the expenditure of tax money to save the economy, emphasis should be placed on the retention of decent paying US jobs - the spending of the people that have them keeps our service sector afloat. There''s no way that any money should be going to those who already have enough to buy yachts (bankers). Republicans have it backwards...they want to spend tax money for the benefit of the wealthy, but whine about the expenditure of a far smaller amount on the average citizen of the US. As far as the good of our nation is concerned, we''ve still got far too many modern republicans in office.

[jsd330]

If you want to read some good information on the federal reserve bank, goggle or search "corrupt federal reserve"

[whitemale08]

A nation''s currency and credit does not belong to another country because it is SOVEREIGN.

When a nation allows another country to ''speculate'' on what their currency/credit is worth who owns it?

Right now all currency/credit is ''speculated'' by ''currency traders''. That means all currency/credit is ''private'' and its value belongs to private individuals on Wall Street and in the City of London.

There''s no reason why a poor African country or a poor U.S., cannot succeed if given a chance to truly own its own currency/credit.

We built the United States with our own ''sovereign credit'', why can''t we rebuild America again with ''sovereign credit''?

Why can''t African countries develop themselves with their own ''credit''?...Why do they have to develop the same way of the West?

They don''t need some fake krap worthless derivate-swap that the IMF/World Bank guarantees in ''writing''. That is ''looting''.

What Africa wants from us is to be left alone and maybe exchange/barter some agricultural products or tourism for power plants and infrastructure until their country is completely developed.

The whole idea of ''English is the only language of success'' is stupid and should be rejected. It''s empire and countries have their own languages

and cultures should not be forced to learn ''English'' to practice ''structure-finance'' of derivates to loot their neighbors.

[whitemale08]

We don''t need the IMF/World Bank anymore, they are nothing more then a bunch of usurers.

What we need is what Lyndon Larouche describes as an International Credit Union with the sole purpose of National Sovereign Credit to be used specificly for infrastructure, and energy development.

This system will be anchored by a new Bretton Woods treaty where currency cannot be manipulated but is stabilized by ''fixed-exchange-rates''.

Each nation on earth will do what our Constitution says and that is only Soveriegn Government can ''utter'' credit and currency.

This will take ''development'' out of the sphere of Wall Street and the City of London. People will be organized around their own nation''s credit system,

and manufactured goods and resources will be bartered for under long-term treaty agreements among Sovereign Nation-States.

That is what needs to replace the collapsed bankrupt evil ''monetary-systems'' where private central banks ''determine'' how much money is within a make-belief budget and funds or credit is only allocated by inflationary supply of fiat-currency.

That monetary-system which is already dead must be buried and new International Credit Union among Sovereign Nation-States must replace it for the survival of mankind.

[whitemale08]

have often read your posts on here about the IMF/wrold Bank and the way you see them as predatory. But, in 1500 characters its impossible to describe the intricacys and I do not subscribe to anything I dont understand. So, do you have a reference to cite so I can read up on your theories that our financial problems are rooted in currency organizations?


--------------------------------------------------------------------------------

Posted by machineguy at 02:04 PM : Dec 21, 2008

Sure, start with this video...

http://video.google.com/videosearch?hl=en&q=imf%20world%20bank&um=1&ie=UTF-8&sa=N&tab=wv#

[McHineguy]

You are on the right track, the thing is is that we are being blackmailed by Wall Street and the City of London who have long ago took over the IMF/World Bank to loot 3rd world countries after it rebuilt Europe.

Now it''''s our turn, because like a true parasite that eats out it''''s host, in the end it eats itself.


--------------------------------------------------------------------------------

Posted by whitemale08 at 01:51 PM : Dec 21, 2008

I have often read your posts on here about the IMF/wrold Bank and the way you see them as predatory. But, in 1500 characters its impossible to describe the intricacys and I do not subscribe to anything I dont understand. So, do you have a reference to cite so I can read up on your theories that our financial problems are rooted in currency organizations?

[whitemale08]

role. The US uses the World Bank to keep our currency sound and our dollars worth something. As soon as the bailout was passed the world Bank shut up. So, my opinion is that behind the scenes were phone calls that said something like; "You crooks skrewed us and either make it go away or suffer the consequences". No one is going to say it publicly until the crisis is over.


--------------------------------------------------------------------------------

Posted by machineguy at 01:21 PM : Dec 21, 2008--

You are on the right track, the thing is is that we are being blackmailed by Wall Street and the City of London who have long ago took over the IMF/World Bank to loot 3rd world countries after it rebuilt Europe.

Now it''s our turn, because like a true parasite that eats out it''s host, in the end it eats itself.

[McHineguy]

This bailout loan gives the automakers a chance to repair their industry. I hope they take it and stop their finger pointing. Change is essential. The US auto industry has been in steady decline for 25 years or more, often the burnt of jokes. Even used in college classes of examples on what NOT to do. We, the American public cannot fix this for the industry. This loan will not fix it. They must find a way to build more quality at less cost. that will mean sacrifice to everyone in the industry and finger pointing will only delay progress.

[McHineguy]

The story that the media is missing is that Bush decided to go with the auto-bailout if Congress gives him the other 350 billion in TARP to bail out worthless hedge-funds, buy-out-firms, and derivatives-krap.


--------------------------------------------------------------------------------

Posted by whitemale08 at 11:17 AM : Dec 21, 2008

I cant prove it but I am very suspicious, almost certain, that there is world bank pressure on the US to shore up those hedge funds. when the news of financial meltdown first hit there was world wide complaints, the World Bank met, and there was talk of downgrading the US role. The US uses the World Bank to keep our currency sound and our dollars worth something. As soon as the bailout was passed the world Bank shut up. So, my opinion is that behind the scenes were phone calls that said something like; "You crooks skrewed us and either make it go away or suffer the consequences". No one is going to say it publicly until the crisis is over.

[McHineguy]

I would not only like to see UAW cut their wages to what their competitors make, but Auto executives limited to basic salaries also. Their bonuses, stock options, and other bennies drive up the cost of cars dramatically. This old stuff of having to pay more to get the best doesn''''''''t cut it with me. If they don''''''''t like the pay, get them out and find someone else. Look what their so called expertise has brought on. Were all the bennies worth it, did they make the companies perform better? I think not.

Posted by quickly101 at 11:14 AM : Dec 21, 2008

I also think the executives are overpaid. But lets be specific here. If all the top executives in all of the Big 3 got zero pay they will save less than $4 Billion (a nice chunk of change). But, if the UAW agreed to an across the board reduction of just 20% they would save $* Billion (twice as much). If the CEOs and the UAW work together and find a way to build cars for 25% less they save $30 Billion. By comparison, every other industry in America (except oil) has reduced costs in the last ten years.