Friday, September 19, 2008

Possible Bail Out for the Big 3 Automakers?

This is becoming ridiculous. The car makers in this country for years have been greedy. It is why they have failed. They want to sell safety features that should be standard on a car as luxury features. They have refused to invest in new technologies. They have closed plants and moved across the border to hire cheaper labor which is a direct insult to the American people. Now they want bailed out? Fuck the car makers! Update you technology and stop polluting the world with fossil fuels!

Plunging auto sales, high gas prices and election year politics could help convince Congress to approve a $50 billion loan package to embattled U.S. automakers that Detroit's Big Three claim is key to their future success.

On Wednesday, General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC reported monthly sales declines of at least 20% from a year ago, as American car buyers continued to turn away from SUVs and pickups and towards more fuel efficient car models.

The Big Three are now in the process of closing truck assembly lines and rushing to catch up with hybrid and other fuel efficient offerings from Toyota Motor (TM) and Honda Motor (HMC).

But with GM and Ford saddled with junk bond debt ratings and privately-held Chrysler with the thinnest capital cushion of the three, Detroit is caught in a credit squeeze that will make such investment difficult if not impossible.

"Funding such a shift is a tough lift even under optimum circumstances," said GM spokesman Greg Martin. "The credit markets are suffering. You had this seismic inversion of the market where no one wants to buy a full-size truck."

Thus, the automakers have deployed what one industry official describes as a "surge" of lobbyists and executives at both the Democratic and Republican Party's political conventions. The Big Three's hope is that if they can win speedy passage of the loan package, they can move more quickly to retool their plants to produce more smaller cars.

The $50 billion loan package, first proposed by the auto industry last month, has won the support of presidential candidates Barack Obama and John McCain as their campaigns eye key votes in Michigan and Ohio.

On Tuesday, White House Press Secretary Dana Perino signaled the outgoing Bush administration was open to approving the loans.

"It's something we're aware of and we're talking to the members of Congress and also the people in the industry, and thinking about what they might think would be required from their perspective," she said.

But as much support as the idea has, the automakers say they can't let up until the loan package is not only signed into law but also funded by Congress.

Last year's energy bill included up to $25 billion in loans to the Big Three, but lacked the necessary funding to actually make the money available.

That earlier legislation would allow automakers and suppliers to borrow the money at Treasury bill rates for up to 25 years as a way to fund the conversion of plants and the development of new technology. Because of their poor financial status, the automakers would be forced to borrow money at rates well above 10% in the open market.

The automakers have argued this is not a bailout and point out that the estimated cost of complying with new, tougher fuel efficiency standards for vehicles is just over $100 billion.

"Borrowing capital at a lower cost than the double-digit rates we're looking at will allow us to accelerate the technology, and transform the business quicker," said Ford spokesman Mike Moran.

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