President Bush: Automakers to get $17.4B

President Bush: Automakers to get $17.4B

news.yahoo.com

WASHINGTON – The Bush administration came to the rescue of the deeply troubled U.S. auto industry Friday, offering $17.4 billion in loans in exchange for concessions from carmakers and their workers.

"Allowing the auto companies to collapse is not a responsible course of action," President Bush said. Bankruptcy, He said that a bankruptcy was unlikely to work for the auto industry at this time and would deal "an unacceptably painful blow to hardworking Americans" across the economy.

(visit the link for the full news article)

Even though I do agree now that the auto industry should not be allowed to collapse. In the past I had felt otherwise until thoroughly researching the problem.

My issue with this is: where is the money coming from?

Technically the US Congress is supposed to hold the purse strings of the US. When did the executive branch get a purse?

I don't want the auto industry to collapse, but the method to fix the issue disturbs me.

news.yahoo.com
(visit the link for the full news article)

Yeah, yeah will see if that happens...
The way I heard it... the hook was correcting the sticking point Congress had.. UAW has to agree to concessions and deep pay cuts before they hand out any checks... the question now is will UAW go for it or dig in their heels and whine about it all being so unfair?

Either way the car companies still have to restructure or face returning all the money by the end of March... does anyone really believe they can turn it all around by then?

I give the automakers 6 months and they will be back for more or Congress will sneak in billions more for the automakers once Obama becomes President. Either way, Christmas isn't over for them yet.

I still don't agree about giving the money to them. Everybody says it should be done to save jobs. Those jobs will be cut anyway because the rest of America will be unemployed and unable to buy cars anyway. But at least they will have a job for the interim.

reply to post by DaddyBare


If you think about it, this is just enough to pass the problem to the next administration. Bush will look back and point out, see I wasn't a Hoover, the economy didn't collapse on my watch.

What really scares me, is that I don't think Obama will be able to stop the collapse on his watch.

Sorry to bring this to the story but while I agree that the automakers are one of the last industrial staples left in America and that they should not be allowed to die, it may be too late for them anyway.

If we follow what is going on with the economy without business to support the auto makers they are going to fail anyway.

Yes the bail out will only support them for a short amount of time but with the credit frozen and people been lay off I don't see how can they come back like the Phoenix from the ashes.

I see them falling for bankruptcy even before the six month death line.

How will this affect the price of new cars? What about the rebates / incentives that are offered on them?

Lower prices / more rebates = more people buying right?

The interesting aspect here will be the labor contract reform with the UAW. Bye Bye job banks, excessive pay and gravy train retirement packages. Once again, the ball is in the UAW court. I don't recall any info regarding steep executive pay cuts.

Either way, their jobs are doomed without any heavy restructuring within the corporation. Let's plug the leaky dike with a piece of double bubble chewing gum philosophy.

reply to post by elevatedone


They can offer whatever they want, but until the banks free up financing most Americans will not be able to purchase any cars.

I had seen some talking heads on CNN discussing the issue recently talking about well BMW doesn't seem to be having a problem with sales. I sat there thinking does this guy not realize that many people who buy BMWs, "buy" and not finance the car. Average Americans have to finance and usually with little to no down payments.

So unless the banks free up the flow of credit, the industry will collapse.

Can someone tell me why we gave almost $1 trillion to the financial sector if theyre not going to finance anything?

Originally posted by jibeho
The interesting aspect here will be the labor contract reform with the UAW. Bye Bye job banks, excessive pay and gravy train retirement packages. Once again, the ball is in the UAW court. I don't recall any info regarding steep executive pay cuts.

Either way, their jobs are doomed without any heavy restructuring within the corporation. Let's plug the leaky dike with a piece of double bubble chewing gum philosophy.

Ya I guess the Duct Tape is too expensive.

reply to post by elevatedone


The problem is that if this happen the way you see it, its call deflation and that is a killer of jobs and the economic recovery and eventually will lead to depression.

See that may sound good and I am one right now in the market for a new car as my daughter total mine in Atlanta last month.

But the banks are very scare to give loans and that is what is creating the credit freeze, as the banks and lending institutions knows that many people are sitting ducks when it comes to employment and that many people are losing their jobs even in areas that were permanent a while back.

Here in neck of the woods the third industrial business is closing its doors, in two years my small town has lose thousands of jobs, first bob candies went to Mexico, then Merck left also now Cooper tires just lay off everybody right for the holidays, if we combine this stories with many other small towns across America the picture tells the story all bu itself.

So local banks are not doing loans and we already have seen what big financial institutions re doing with the tax payer bail out.

So even if they offer buy one car and get one free, is not going to be many that will be able to get the deal.



[edit on 19-12-2008 by marg6043]

Originally posted by MikeboydUS
reply to post by elevatedone

 

They can offer whatever they want, but until the banks free up financing most Americans will not be able to purchase any cars.

I had seen some talking heads on CNN discussing the issue recently talking about well BMW doesn't seem to be having a problem with sales. I sat there thinking does this guy not realize that many people who buy BMWs, "buy" and not finance the car. Average Americans have to finance and usually with little to no down payments.

So unless the banks free up the flow of credit, the industry will collapse.

Can someone tell me why we gave almost $1 trillion to the financial sector if theyre not going to finance anything?

Me and a couple folks at work were saying the exact same thing.

It's not the car industry that needs the fixing, if you can't get a loan out to buy the car the price isn't going to matter. It's just digging the financial hole deeper. I'm starting to wonder where they got their financial courses at. I learned in high school economics 101 what they are doing does not work. Of course out teacher was a drunk but he was apparently a drunk who was correct as it looks right now.

Originally posted by MikeboydUS
reply to post by DaddyBare

 

If you think about it, this is just enough to pass the problem to the next administration. Bush will look back and point out, see I wasn't a Hoover, the economy didn't collapse on my watch.

What really scares me, is that I don't think Obama will be able to stop the collapse on his watch.

I totally agree...
I also find the timing more than a bit suspect... 1/2 hour before the stock market opens on a Friday.
Last Thursday the Senate failed, so he came out .......again Friday morning to announce that they would make moves to keep them alive.

Soon the bandage will come off, the box will be empty and guts will start spilling onto the floor.

An additional $4 billion may be available in February, the Bush administration said. The loans are designed to stabilize U.S. automakers through March 2009, at which time the automakers must show they are financially viable. "If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury," the statement says.

SOURCE

I don't know if it's just me but I'm not getting a good feeling about this. I work in the auto industry and it's amazing to see how everyone is walking around with blinders on. So many people are happy to hear this news but when I point out that "The loans are designed to stabilize U.S. automakers through March 2009, at which time the automakers must show they are financially viable." If they can't show they are viable by then, your government will request the money back but how do they expect to get it back when I'm sure the execs will have given themselves lots of bonuses and stashed or wasted the money and the actual company have no money and will in all intense and purposes be bankrupt.

Just my take on it. No matter how much money all these companies get, it's not going to stimulate people to buy cars when they have no money to get cars and banks still won't give loans to get cars. How is this suppose to help the average joe? Oh yah, forgot, it's not suppose to.

Some of the details are starting to emerge

In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government will have the authority to block transactions larger than $100 million.

The automakers must cut their debt by two thirds in an equity exchange, make half of the payments to a union retirement fund in equity, eliminate a program that pays union workers when they don’t have work and have union costs and rules competitive with foreign automakers by Dec. 31, 2009. The requirements could be modified by negotiations with the union and debt holders.

“The restructuring they’re going to have to go through will be huge,” Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut, said in a Bloomberg Television interview. “I can’t see a way for GM to operate properly with the capital structure they have.”

Books Examined

The Bush administration agreed Dec. 12 to consider options, including use of the TARP, after Senate Republicans turned aside the House-backed plan. The Republicans sought more specific automaker conditions, such as pay in line with foreign manufacturers’ operations in the U.S.

United Auto Workers leaders agreed this month to suspend the program that pays laid-off employees after their jobs end, and to postpone automakers’ contributions to new union-run trusts that will take on responsibility for retirees’ medical care.

But now we have another Problem

Treasury Secretary Henry Paulson said Friday that Congress will need to release the last half of the $700 billion rescue fund because the first $350 billion has been committed.

Paulson said the use of the rescue fund to provide loans to the auto industry along with all the other rescue efforts for the financial system meant that the administration has now basically allocated the first half of the largest government bailout program in history. and the program has used up all its initial capital

Link to running out of money story

I wouldnt get your hopes up on this. This might be a temporary loan for an "orderly bankruptcy" for one of the companies. Bush referred to this yesterday and this loan might not be a loan it might be a grant for a controlled demolition so to speak. We need a manufacturing base here in America in a major way so if they DO allow them to go under which they should I hope someone with some money comes in and picks up the slack.

[edit on 19-12-2008 by tjeffersonsghost]

Thanks DaddyBare for bringing the Paulson asking for the rest of the bail out, I opened a thread on the subject as this is a very important issue that shows that the so call "stabilization of the fanancial is nothing but an illusion", just a few weeks ago Paulson was claiming that he was to leave the money to the next administration so they should have something to start with.

Now he changed his mind? that is very troublesome.

I think it all needs to fall. The government and the corporations have gotten too big to support theirselves. We should not be bailing anyone out. People, government, empires and whole nations have been falling and rising since the beginning of time and mankind has continued to survive and adapt. Yes it will create a world crisis but maybe it will put us back on track with what is really important.

Is Ford getting any? They did say they could last. It would be hard, but they could. Will they take any and deal with the stipulations or keep going? Also, how come the GOP has no problems with giving now totalling 2 trillion too their friends in the banks and AIG who used the money for a resort and bonuses but the Car Companies are raked over the coals? As they say on the News "If you take a shower before work you're bailed out. If you take a shower after work you're told you will lose every thing you've worked for because your boss didn't support the GOP."

reply to post by secretstash


When Rome fell it didn't exactly put anyone on any right track.

We had four hundred years of almost hell on earth in the West though.

Things got so bad in the West people didn't know how to fire(bake) bricks in kilns anymore.

If it hadn't been for a bunch of illiterate sheep herders from Arabia suddenly learning to read and write, build libraries and make books, vast amounts of knowledge from the Greeks and Romans would have been lost forever.

With the world so interdependent now, when we go down we'll take the whole world with us. It won't be pretty and highly doubt it will put anyone on any decent track.

If anything it will pave the way back to where we were at before the Age of Enlightenment, in other words Feudal Warlords and Monarchies.