Thread: Citi Gets $300B - Car Makers Kicked In Teeth

Congress offer falls short of car industry’s hopes

UNITED STATES: Management lambasted before being offered $15bn
From Andrew Purcell in New York

THE CAR manufacturers knew they would have to beg. That much was clear before the Senate Banking Committee hearing began, when General Motors chief executive Rick Wagoner told reporters "we're sorry to be asking for this support". Short of prostrating themselves on the floor of the House of Representatives the next day, he and his colleagues could hardly have done more to encourage the bipartisan kicking they received.

The contrast with Citigroup's $300 billion rescue, thrown together over a weekend with few guarantees that the government would recoup the money, was glaring. Nobel Prize-winning economist Paul Krugman called that backroom agreement "an outrage", but it attracted nothing like the condemnation that greeted GM, Ford and Chrysler asking for one-tenth as much.

Timing is everything. Congress, along with the rest of the country, is suffering from an acute case of bail-out fatigue. Almost two in three Americans are opposed to the idea of sinking government money into a bloated, uncompetitive automobile industry that may well die anyway. Vehicle sales fell 37% in November to the lowest rate in 26 years; Chrysler is selling about half as many cars as it did a year ago.

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The truth is that, other than the manufacturers, their unionised workforce and their suppliers, nobody really supports the bail-out. Few people believe it will succeed in the long term, but the consequences of failure are so dire that the Big Three will get most, if not all, of the money they're asking for.

The chief executives - Wagoner, Alan Mullaly of Ford and Robert Nardelli of Chrysler - had undergone a public relations makeover since their disastrous appearance before Congress a fortnight ago, arriving in hybrid electric/petrol-driven cars rather than private jets.

They also had a more detailed plan of how to spend the $34bn they say is needed to avert catastrophe. Nardelli weighed the dossier in his hand to emphasise its heft, even as the panel denounced him as incompetent and untruthful.

Senator Richard Shelby, the most determined "no" vote on the committee, told the CEOs that if they brought a similarly skimpy proposal to a bank, asking for a loan, they would be chased out of the foyer. Even committee chairman Chris Dodd, a Democrat, was pessimistic, talking of a "death sentence" for the car industry.

The House of Representatives hearing was no kinder and, with President George Bush expressing concern over "taxpayer money being provided to those companies that may not survive", it appeared the industry had no friends left.

Economist Mark Zandi, an expert witness, disputed the sums. The true price of saving the industry would be about $100bn, he said, but he supported the bail-out, because the cost of letting them fail would be so much higher.

Although the companies directly employ only 240,000 workers, the Centre for Automotive Research claims a million jobs in suppliers and dealerships are at risk, plus almost two million more in businesses that depend on knock-on consumer spending.

But even if an agreement that a severe restructuring would be better than an abrupt bankruptcy can be reached, no-one wants to pay for it.

The Senate and House committees called on the Treasury and the Federal Reserve to act. President Bush suggested that the $25bn that Congress has already put towards building fuel-efficient cars should become an emergency loan.

Barack Obama has indicated that he supports a bail-out - his debt to the unions, who helped him win Michigan easily, is deep enough that he cannot be seen to stand by. But General Motors in particular cannot wait until January.

In the event, according to two senior congressional aides, Congressional Democrats and the White House reached agreement on a price tag, of between $15bn and $17bn, and a funding source for temporary aid.

On Friday, the United Auto Workers union covered a page of the New York Times with portraits of working men and women. The superimposed caption read "We Are Not Bankers". Having turned on the tap for the financial services industry, Congress can hardly turn it off for the Rust Belt.

http://www.sundayherald.com/internation ... _hopes.php

Why should we bail them out when they have turned on the American people who built them as well as American workers?

Should we bail them out when they are already talking about selling out to China? They get their billions in bailout and then ALSO pocket a small fortune from China?

I fail to see where they should get a bleeding penny.

Why should we bail them out after they made poor business decisions. They chose to build gas guzzlers and too many vehicles not us the taxpayers. Also many of the assembly and parts plants are in Mexico. I can tell you that the Canadian assembly are barely existant after massive layoffs. In fact GM shot one down. Parts manufacturers have also had massive layoffs and some have closed permanently.