Outside the Beltway

Outside the Beltway

Uncle Sugar to Bail Out Auto Companies

Dave Schuler
22

The White House and Congress have agreed in to advance a $15 billion loan to the auto companies:

(CBS/AP) After weeks of tense discussions with the heads of the U.S. auto industry, Democratic Congressional leaders have reached an agreement that may just clear the way for the Big Three to get the money they need to survive … for now.

CBS News correspondent Kimberly Dozier reports that significant progress came Friday night, when Democrats from both the House and Senate agreed to bail out the struggling General Motors, Chrysler and Ford with federal funds.

Several officials say the White House and congressional Democrats have agreed on $15 billion in loans, which is less than half of what the car chiefs were seeking.

They say the breakthrough came after House Speaker Nancy Pelosi bowed to a demand by President Bush that any aid come from a fund that had been intended to help Detroit produce more fuel-efficient cars.

By my reckoning and based on the numbers the auto companies have provided that will give them between two and three months.

What will have changed in that time to transform failing companies with little hope of survival into viable ones? Is this just kicking the can down the road and delaying the inevitable?

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22 responses to “Uncle Sugar to Bail Out Auto Companies”

  1. James Joyner Avatar
    James Joyner

    The worst of all worlds, it would seem. Encouraging rent seeking and yet not enough of a guarantee to have even a plausible chance of getting the job done.

  2. Floyd Avatar
    Floyd

    Now is the time to buy Ford stock, with all the “nattering nabobs of negativism”, like street-prophets, proclaiming “THE END IS NEAR”.
    2K now will get you a new car in five years.

  3. charles johnson Avatar
    charles johnson

    What will have changed in that time to transform failing companies with little hope of survival into viable ones? Is this just kicking the can down the road and delaying the inevitable?

    Since the executives in question all get paid millions of dollars a year, they must be incredibly smart and competent. If the free market is accurately awarding them for their abilities. So such incredible people can surely run a company effectively.

  4. Eneils Bailey Avatar
    Eneils Bailey

    The White House and Congress have agreed in to advance a $15 billion loan to the auto companies:

    As they say where I live; this just ain’t right.

    They are too many bad players in this situation already.

    The Management of car manufacturing companies who have not had an idea as to what products and innovations would keep and secure their market. After all, they gave to us vinyl tops in the sixties and opera windows in the seventies.

    The Unions, who have a monopoly on labor for the big three; who have forced the manufacturers to accept unruly contracts and uninspired laborers or shut the place down. I have never understood the false adversarial relationship that unions fostered with the great manufacturing and wealth producing companies in this nation. Reflect back on the steel industry, the telecom giants, the railroads, and manufacturing in general that has left this country for friendlier places in the third world.

    The Federal Government; you will just love it when the same people that brought you the Postal Service, Medicaid, Medicare, the IRS and assorted other inefficient programs start designing your cars and running ten per cent of the US economy.

  5. odograph Avatar
    odograph

    I must be a bigger cynic than most – I see this as doing essentialy nothing. A 15B loan is so small in 2008 context.

  6. markm Avatar
    markm

    What will have changed in that time to transform failing companies with little hope of survival into viable ones? Is this just kicking the can down the road and delaying the inevitable?

    Well, there will be one hell of a lot less people employed by GM, Ford and Chrysler for one. I’m sure the UAW will make some bigger concessions for another. Much of the “restructuring” and fat cutting has already happened. The UAW contract was redone (needs further tweeking though)but if they should survive into next year they will have competitive compensation with the foreign manufacturers.

    Keep in mind, these companies didn’t fail
    all on their own. Current economic conditions brought on much of it…hell, if the October “crisis” hadn’t have happened I doubt we’d be talking about the big three. Much of what congress says they need to do has been being done or was done over the past few years.

    That said, if the economy gets worse as predicted and people sit tight with their money, nobody is going to be buying any cars/trucks of any automaker, foreign or domestic. (I see even the foreign automakers are feeling the pinch).

  7. ggjr Avatar
    ggjr

    Keep in mind, these companies didn’t fail all on their own.

    Neither did most of the small businesses which have failed in the last few months, but they’re not getting handouts. And its arguable that 15 billion to failing small businesses would keep more people employed than 15 billion to the big three.

  8. ew Avatar
    ew

    I’m disappointed to hear that the liberal illuminati allowed that much tax money to be spent on such inefficient companies.

  9. markm Avatar
    markm

    Keep in mind, these companies didn’t fail all on their own.

    Neither did most of the small businesses which have failed in the last few months, but they’re not getting handouts.

    Was the money they got not going to them anyhow?. The money was already going to them to piss away on “green” crap. Apparently pre-crisis there were those that thought those three big businesses needed that money for “green” crap…small businesses not so much…but i’m pretty confident if it’s possible to bail out individual small businesses the next admin will find a way to do it.

    Look, were the economy rolling along and these three came up lame i’d say let them fail / file for bankruptcy. As it is, and i’m not alone, were these left to fail under the current economic conditions the results could be the final nail in the economic coffin. So it’s either give them a loan and hope it works or they shut the doors as chapter 11 apparently isn’t possible (what with money for lending being tight).

  10. anjin-san Avatar
    anjin-san

    Considering that the Bush admin lost/stole about 15 billion in cash in Iraq, 15 billion to keep the big three in business at a time like this does not seem like such a bad idea. AIG got quite a bit more, are they somehow more deserving?

  11. Brett Avatar
    Brett

    You could argue that it’s a victory for the Democratic Leadership, who wanted a bailout for the auto companies. In three months, they’ll be in power with the new Congress, and able to do more – but right now, they’re stuck with a less-than-majority Senate.

  12. odograph Avatar
    odograph

    Anjin, the case was made that AIG’s counterparties were more deserving. Not they.

  13. markm Avatar
    markm

    You could argue that it’s a victory for the Democratic Leadership, who wanted a bailout for the auto companies.

    It’s not much to be proud of and if it doesn’t work out then how do you spin the victory?.

  14. odograph Avatar
    odograph

    It’s not much to be proud of and if it doesn’t work out then how do you spin the victory?.

    “We supported the auto industry.”

    (at $15B cheap insurance)

  15. just me Avatar
    just me

    I am sick of my tax dollars bailing out companies. It is sad that the big three are struggling, but the government isn’t responsible and if we don’t stop with this whole “too big to fail lets bail them out” program then who is going to bail out the US government?

    It is time to let companies fail-whether they are big or not.

  16. markm Avatar
    markm

    It’s not much to be proud of and if it doesn’t work out then how do you spin the victory?.

    “We supported the auto industry.”

    (at $15B cheap insurance)

    That $15B on the cheap is essentially to get them trough until the next admin takes the wheel. I’m confident there will be a “plan” that will be put in place that will cause some sticker shock.

    Apparently that jobless report on Friday scared the bijeezus out of some people.

  17. bob in fla Avatar
    bob in fla

    Of course they are kicking the can down the road. Anything more than this would only be vetoed by Bush; it was just a couple weeks ago he was sayin’ No Way to any Detroit bailout. So come February, the new Preside3nt & Congress will end up doing it all again, hopefully with a little clearer idea of how far our economy is tanking. Also, more time to finalize (or not) the rest of the bailout gives them more time to squeeze the most concessions out of the union & companies.

    markm, I kinda go along with what you are saying. Detroit hit its peak about 40 years ago & have been downsizing in fits & starts ever since. The labor market & economy was given time to readjust gradually. Imagine what the economic effects would have been if the previous downsizing had occurred all at once. Well, that is the same problem facing us now. Even if GM & Chrysler will eventually fail, no matter what, at least we are buying time to deal with it more effectively.

  18. odograph Avatar
    odograph

    Kicking the can, that’s true. I’m not going to guess the environment in February

  19. Drew Avatar
    Drew

    Kicking the can into the sewer if you ask me. Having started my career in the steel industry, which means in the auto industry as well, I’ve seen these cats at work.

    In Latin: $15 billionus downus toiletus certanus.

    Ok, sorry, Julius.

  20. belloscm Avatar
    belloscm

    Still think that a lot of this is kabuki theater masking a “save the UAW” agenda.

    Until the fixed labor cost differental that exists between union and non-union auto plants is eliminated (and not by unionizing plants in right-to-work states), the big three are doomed.

    As an offset measure, Detroit could increase productivity by a third (increase automation, hire and train a professional workforce), but the UAW will fight to keep that from happening.

    It’s a shame; I do love my Chevys.

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