Auto bailout backers offer to cut $25 billion size
WASHINGTON — Facing an uphill battle in Congress and stiff opposition from President George W. Bush, supporters of a government bailout for the sinking U.S. auto industry are offering to reduce its $25 billion size.
General Motors Corp., Ford Motor Co. and Chrysler LLC, battered by an economic meltdown that has choked their sales and frozen credit, are lobbying lawmakers furiously for an emergency infusion of cash. GM has warned it might not survive through year's end without a government lifeline.
Other auto suppliers and dealers with showrooms empty of customers plan to join the effort Monday when Congress returns following the Nov. 4 elections. The key Senate vote on preventing opponents from blocking the package could occur as early as Wednesday.
"There's a need for immediate action," Alan Reuther, the United Auto Workers union's legislative director, said Friday. He said one option under consideration was a smaller, more targeted amount of funding "that would get the companies through to March."
Sen. Debbie Stabenow, D-Mich., said negotiations were taking place among senators on what the amount should be. "This is about getting enough votes to be able to solve the problem," she said.
Democrats want to carve a portion of the $700 billion that the Bush administration is using to bail out banks, insurance companies and other financial institutions. The White House on Friday came out firmly against the approach.
White House press secretary Dana Perino said the administration would rather Congress expedite the release of a separate $25 billion loan program for the development of fuel-efficient vehicles and have the loans used for more urgent purposes as the companies struggle to stay afloat.
"Democrats are choosing a path that would only lead to partisan gridlock," Perino said.
Environmentalists and House Speaker Nancy Pelosi, D-Calif., have vehemently opposed using that money for anything other than designing and building vehicles that get higher gas mileage and produce less pollution. Democrats hold a 37-seat majority in the House and bailout supporters foresee little difficulty winning its passage there.
But the measure needs 60 votes to survive in the Senate, where Democrats will hold a razor-thin 50-49 majority when President-elect Barack Obama gives up his seat on Monday. A furious search was on for a dozen Republicans to break the anticipated filibuster from opponents.
Several Republicans have already lined up against it. "Like most Americans who are concerned about the direction of our economy and more federal spending, I must also ask — when is enough, enough?" said Sen. John Cornyn, R-Texas.
Two Republicans — Kit Bond of Missouri and George Voinovich of Ohio — said they will back the plan. Several other Republican senators have signaled they might accept a rescue if strict conditions are put on Detroit's Big Three companies, including management and salary changes, union concessions and a commitment to making more fuel-efficient vehicles.
Bond, whose home state of Missouri has several auto plants, said the concept of government mixing with the free market was "very troublesome." But he added, "We have to act in unique times of crisis when tens of thousands of Missouri workers are in danger of losing their jobs."
Democrats are modeling their bill on the bailout terms that the Bush administration has used for doling out $290 billion to banks and insurance companies. The government would get an ownership stake in the auto companies in exchange for the loans to ensure that taxpayers would get their money back if they return to profitability.
Nov 16, 2008 at 2:21 a.m.
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Of course most companies that need to raise capital just issue more shares of stock, or sell public bonds. More stock shares will, of course dilute the shares, and make it a much less attractive investment. Any bonds issued would have to be with a very high rate of interest, for anyone that was willing to take on the risk (risk of them not going under), would want a very high return of interest on their risky loan.
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Such measures are how companies normally raise capital when in trouble. GM just knows they can dupe law makers into a low interest, sweetheart, bailout loan under the silly mantra of "saving 3 million jobs". A rate that no one in their right mind in the public sector would EVER take the EXTREME risk of doing. When it's the tax payer's $$$ though, who the hell ever cares anymore? Certainly not your elected officials!
Nov 16, 2008 at 2:05 a.m.
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OK, I was educated in the JNVL public school system, so I may not be the sharpest knife in the deck, but lets do some simple math here.
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The market capitalization of GM is $1.84 billion. Thats the current stock price ($3.01 at fridays market close X by all the outstanding shares, approx 610 million shares).
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So you are telling me that I (the tax payer) am suppose to bailout a company for the tune of $20 BILLION, that for the same price I could BUY OUTRIGHT 11 times over?
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This is the most laughable thing ever. Welcome to the new Marxist order, my friends. Fail all you want, the government will always be there to bail you out.
Nov 15, 2008 at 11:17 p.m.
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Act in haste, repent at leisure.
Nov 15, 2008 at 4:32 p.m.
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This bailout is needed whether we like it or not. There is a study that estimates that if one company files bankruptcy the others will follow. This will cause an estimated 3 million job losses. This cannot be allowed to happen.
Nov 15, 2008 at 3:23 p.m.
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Why should they bail out these companies that made poor decisions? Even if they did get the bailout are they going to start Janesville's GM back up? I doubt it...it will be going to pay unemployed people there wage for two years...Just to go broke again. Give it up; these companies should come together and make one GOOD American car company.
Nov 15, 2008 at 2:57 p.m.
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Let the automakers go bankrupt. Why would anyone throw billions of taxpayer dollars to the autmakers when they will go bankrupt anyway. Nobody seems to realize that even if Americans wanted to buy a dozen brand new cars each most American no longer have the credit worthiness to buy anything on credit. Who's going to buy the product? Maybe Uncle Sam will buy each and every American a new vehicle. Eventually the taxpayers will be on the hook for this financial meltdown mess. NO MORE BAILOUTS WITH TAXPAYER DOLLARS!
Nov 15, 2008 at 1:31 p.m.
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Maybe they should wait to hand out the cash until the domestic car makers actually design cars people want to buy, and I don't mean the GM faithful. Back to back every American car I've had pales in comparison with a foreign vehicle. Why is that?
Nov 15, 2008 at 12:21 p.m.
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Indecision is often worse than wrong action.~Henry Ford.
This is the fundamental problem with GM and what has happened. Everyone stood pat, as the world around them changed. Gas didn't suddenly spike 3 dollars over night. It was a gradual increase and GM did nothing to counteract these moves. Yes, they have the volt coming out, but who even knows if there will be a GM around for that to happen. The UAW could've helped matters had it not been so blinded by it's own agenda.
Indecision becomes decision over time. GM failed to do anything to stave off elimination and the American people made it's choice for them. We have moved on to smaller more efficient vehicles and we may never come back to SUV's for risk of driving gas prices back up.
And now they want the government to bail them out. Please, why should we give money to an industry that is obviously short sighted and irresponsible.
The Federal government should take that 700 billion and do what FDR did. Invest it in public works projects. We have roads, bridges, and other public facilities that are in dire need of upgrade/repair. These jobs will employ thousands of workers and at the same time change our landscape from the rotten facade it has slowly been allowed to become.
We want to build nations, while the land of the free erodes from the inside out.
Nov 15, 2008 at 11:41 a.m.
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The lower payed workers tax money will bail them out not BUSH!
Nov 15, 2008 at 10:47 a.m.
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I'll have to side with the Republicans on this one. The executive salaries and bonuses are ridiculous for a company that hasn't made a profit in the U.S. for years. The Union salary concessions have to be moved up from 2010 to now. GM needs to kill brands that overlap other brands (GMC, Saturn, Buick, Pontiac) without lawsuits from dealers. All of these things should have been done long ago, and should be a requirement for any bailout money.
Nov 15, 2008 at 10:45 a.m.
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Who would loan $25 billion to a company that is worth $1.6 billion? This is exactly the kind of business that has gotten us into this financial mess.
Nov 15, 2008 at 10:26 a.m.
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I would hope that Congress will impose stiff salary and Hourly rate cuts on all employees until the total loan would be paid back. Those cuts alone would let them become more profitable over the next few years. The salaries could then be adjusted upward after the payback to the Goverment. I guess the bigger question is; Why not buy the whole company of G.M.? It is only worth 1.8 billion today and they want a bigger share of the 25 billion loan.
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