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GM, Chrysler Will Get $17.4B From TARP

From an elated Associated Press:

President Bush: Automakers to get $17.4B

By DEB RIECHMANN, Associated Press Writer

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

At the same time, Treasury Secretary Henry Paulson said Congress should authorize the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said

One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.

Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.

If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.

"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

He said the companies’ workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.

And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers receive unemployment benefits and supplemental pay from their companies for 48 weeks. If they remain laid off beyond that, they move to a jobs bank in which the company provides about 95% of their pay and benefits. Until the most recent contract, people could remain in the jobs bank for years. Early this month, the UAW agreed to suspend the program.

Bush’s plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.

Paulson said that with the help for the carmakers, the government will have allocated the first half of the largest government bailout program in history.

He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund…

Sorry, but this sounds like the worst of all possible solutions.

Especially now that it is one more thing that can be pinned on the Bush administration.

But for once it might be correct to call it “Bush’s Fault.”

(Thanks to BillK for the heads up.)

This article was posted by Steve on Friday, December 19th, 2008. Comments are currently closed.

21 Responses to “GM, Chrysler Will Get $17.4B From TARP”

  1. BillK says:

    This is a family board, so I’ll just say my reaction is to paraphrase Chuck Heston’s last comment in Planet of the Apes in reaction to this.

    Bush has now officially destroyed his legacy.

    From the Los Angeles Times:

    Bush announces plan to provide $17.4 billion to automakers

    By Jim Puzzanghera and Martin Zimmerman

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

    The White House said Thursday that it was considering a government-supported “prepackaged” bankruptcy plan for General Motors Corp. and Chrysler instead of offering emergency loans to the auto giants. That’s a move that many congressional Republicans favor but that the carmakers and some analysts say could lead to the collapse of the companies.

    Bush administration officials, while weighing their final set of options, were “very close” to a decision, White House spokeswoman Dana Perino said.

    After Congress deadlocked on a bailout this month, the White House pledged to help Detroit in hopes of shielding the battered U.S. economy from damage that a meltdown of one or more of the Big Three could cause.

    But time is growing short. GM, Chrysler and Ford Motor Co. have announced dramatic steps to cut costs, including idling plants and slowing production — steps that add to the country’s immediate economic woes even though they may be necessary for the companies’ ultimate survival. Chrysler said Wednesday that it was closing its 30 factories in the U.S. and Canada for at least a month. …

    http://www.latimes.com/business/la-fi-auto-bailout19-2008dec19,0,2247827.story

    I’m so frustrated I could scream.

    When I heard of Chrysler, Ford and GM shutting down their plants rather than continue to crank out product no one wants to buy I cheered at the thought they were finally acting responsibly.

    Now it will be back to the same old business methods so that they can ask Obama for $100 billion in January.

    I’m upset and yet just don’t have anything more to say. Republicans didn’t want him to do it, the American people didn’t want him to do it, and he did it anyway.

    Perhaps he really is the worst President in history.

  2. proreason says:

    As I said in a previous post to another article, in Q4 2007, GM broke even with costs of about $180 Billion. Sales are down 40% since then.

    Do the math. With no significant restructuring or layoffs, GM will lose about $70 Billion this year. And what exactly will make sales go up? Nobody is buying cars for very good reasons.

    A Big 3 bailout will end up costing the taxpayers over $100 Billion, and possibly over $200 Billion.

    But hey, it’s somebody else’s money, right? 50% of the country doesn’t even pay taxes, so it’s free to them.

    And the UAW deserves welfare, right? They have good life-styles that they are entitled to maintain…..at your expense.

  3. Grassy Knoll says:

    “If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.”

    That’s a good one. And how will the Feds make them pay back the loans if they fail to produce a plan? I suppose they would have to lend them the money. Or maybe they would pay them in unsold cars. There are – and will be – quite a few of those.

  4. pdsand says:

    The bailout bill in the Senate would have been an attempt to get the unions to restructure. This bailout plan from Bush attempts to get the unions to restructure. If the unions went into bankruptcy court they would be forced to restructure. Everybody agrees that they need to restructure. So WHY?? give the taxpayers money to them in the meantime, and a 90 day window to restructure. Doesn’t he realize that some pretty significant changes are coming about within the next 90 days, and there will be no credible threat of bankruptcy at that time? Like my friends used to say in high school before trying something incredibly dangerous and stupid, “if I die, dude I’m going to be so mad at you”. It’s not a credible threat. It’s no better than saying to the unions, “you better make some major concessions within the next 90 days, or the government will demand this money back from the company”…oh wait, but then we won’t be in charge of the government at that time, so we don’t really know if the new people will demand the money back or not. Oh and the new people aren’t going to be very inclined to take a hard line with you unions, so they’ll probably just come in and give you a bona fide handout, rather than a loan like this is supposed to be. Yes this bailout makes all the sense in the world.
    And that’s to say nothing of the fact that his taking this action gives the Democrats more credibility to claim that the problem with these companies was his fault in the first place. Why would he take drastic measures to fix it if he didn’t have a guilty conscience about ruining the economy, right?
    And I’m sorry, but why is he falling in lockstep with the Democrat agenda of the last several months if not the last year or more. In everything but the War on Terror, he has been with the Democrats. Does he really think that they’re going to like him because of it? More frightening still, does he really agree with this nonsense? They’re still going to say in unqualified fashion that he is without a doubt the worst President in the entire history of the United States, if not the worst human being in the entire history of humanity. Does he think the show trial is going to go any better just because he threw away roughly a trillion dollars of taxpayer money in the last several months? I don’t know, I just don’t get it.

    • proreason says:

      Going to Washington seems to turn everyone into an idiot. McCain, Bush, perfect examples. Once you get them out of a sane environment (i.e., the military, Texas, the real world), all they hear is the incessant drumbeat of the cesspool media and the other deeply corrupt criminals in Congress. Few seem able to resist.

      This country desperately needs term limits before we go over the cliff. It may already be too late.

  5. crosspatch says:

    I think I will go buy a Ford this weekend.

  6. proreason says:

    Isn’t it curious how Ford, which is in relatively good shape gets scant mention in the press. In this article, for example, the only mention of Ford’s relative health is to say that it supports a bailout of it’s competitors. Ford must have drunk deeply of the socialist elixer (or perhaps there is an eentsy tiny chance Ford has it’s own self-interest in mind).

    Mustn’t let the unwashed know that it’s possible to survive hard times without government largesse!!!

  7. Odie44 says:

    Subprime loan redux.
    Do not loan people and/or companies who cannot repay a loan, aka Loan 101. When said company expresses the fact they may not be able to pay back the loan – it shouldn’t take a genius to figure out – don’t make the loan.

    Of course, the reason for GM and Chryslers “anti-bankruptcy” tripe – is “people wouldn’t want to buy a car from a bankrupt company”. Well, considering your sales numbers – they aren’t buying anyway due to poor craftmanship and bloated prices to pay the union fees for overpaid autoworkers.

    Force them to claim bankruptcy, under specific reorg guidance that is devoid of union influence and you will see results.

    See Delta…

  8. Paulajay says:

    The following video is a good reason why Ford doesn’t need a bailout. Very interesting… http://info.detnews.com/video/index.cfm?id=1189

  9. Steve says:

    Check out this video if you want know one reason why the “Big Three” have such problems:

    Rescue 4 Investigates Ford Employees
    http://www.clickondetroit.com/video/10235271/index.html

    • DEZ says:

      Typical of union labor, I have seen this crap far too often, they resemble welfare recipients more than skilled labor.

      P.S. I really like the new format, Thanks for the hard work Steve.
      Oh, will we be getting custom avatars too?

  10. crosspatch says:

    It isn’t just Ford. GM makes Allison transmissions in Hungary, they have three assembly plants in Russia and build Hummers there. GM builds cars in China, too. They build cars all over the world. None of those companies are US companies, they are all global companies. Over the years US sales has played a smaller role in overall sales for all three companies. In other words, a greater portion of today’s GM sales revenue comes from international sales than it did in, say, 1980.

  11. 1sttofight says:

    My soon to be exploding computer business just hit a brick wall. When can I expect my bailout check?

    I think a couple of mil will see me through these rough times.

    Any body got Weasle Bush’s number?

  12. crosspatch says:

    California increased their minimum wage. California unemployment has started to increase. Has anyone produced a graph of state minimum wage compared to state unemployment rate?

    • Diane says:

      You got me curious, crosspatch, so I did. Data from:

      http://www.dol.gov/esa/minwage/america.htm for the minimum wage and

      http://money.cnn.com/pf/features/lists/state_unemployment/ for the unemployment rates

      The minimum wage data is almost not comparable. Some states have rules that differ depending on the annual income of the business or the number of employees. Some states have multiple changes coming up. I went with the current (12/20/08) wage for “large” businesses.

      Thanks probably to Congress, all but eight of the states clustered between 6 and 8 dollars an hour, making the points look like a little table. The linear fit is almost flat, with a surprising slight negative trend – m = -0.0452. R^2 = 0.001. Given the way I graphed the data, the negative means there is a very minor tendency for lower unemployment in states with a higher minimum wage, but that number is really too small to be considered significant. Those two numbers pretty much say that, with respect to minimum wage and unemployment, we really have only one State, not fifty.

      For what it’s worth…

    • GuppyNblue says:

      There’s one problem with minimum wage increases that we do know. Any increase in wages and salaries without a reciprocal increase in productivity encourages inflation. More money chasing fewer products and services.

      I wish union members understood this basic econ because they’re the ones who get hurt by the artificial increase. Retailers, for example, can simply break out the price gun and compensate for any inflation while the worker must go through a comparatively much longer process of negotiating for another raise. But of course unions have nothing to do with free market principles.

  13. lstevetaylor says:

    Bush I think, but I am not sure now, was once a good leader, but now he is just not very smart, he just doesn’t really undstand the real power and mechanics of captialisum, he should have just let the cards fall where they fall, but the flesh is self centered, and his only concern was not the economy, but what the people and his peers would think of him, he knows very well that Obama’s liberal machine will take very good care of the auto industry, as we know they are all liberal socialist, so conservatives, I mean people who believe in God, it is time to go to work, we must stop the Obama devil bunch from destroying the USA and the rest of the world
    L.SteveTaylor
    of The Republic of Texas

  14. BigOil says:

    These bailouts should have been left as millstones to hang around the collectivist necks of Bush, Pelosi, Reid et al. Instead, Bush pushes through ridiculous bailouts – giving cover for Democrats to shove socialism down our throats.

    Putting RIP on the gravestone of compassionate conservatism can not come quick enough.

  15. Media_man says:

    The $17.4 billion isn’t a GM bailout but a UAW bailout. Given that UAW is a wholly owned subsidiary of the DNC, why would the Bush administration give them this money? Who is advising him to do this?

    Let GM file for bankruptcy, dump the pensions onto the PBGC and begin the restructuring now rather than later. The $17.4 billion should have been used to shore up the pension workout. Now it’s just burned off to no good effect.

    Maybe Bush is as stupid as the liberals have been saying all along.


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