http://www.breitbart.com/article.php?id=D955VPQO0&show_article=1 WASHINGTON (AP) - Citing danger to the national economy, President Bush approved an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans in exchange for tough concessions from the deeply troubled carmakers and their workers. Allowing the massive auto industry to collapse in the middle of what is already a severe recession "would worsen a weak job market and exacerbate the financial crisis," Bush said. "It could send our suffering economy into a deeper and longer recession. And it would leave the next president to confront the demise of a major American industry in his first days of office." President-elect Barack Obama, who takes office a month from Saturday, praised the White House action but also warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it, while also creating the fuel efficient cars of tomorrow." Stock prices rallied on Wall Street as investors cheered the government's action. Republicans on Capitol Hill, though, expressed disdain for the bailout. And while the United Auto Workers said the plan would keep factories running, the union said it was upset by loan conditions "singling out workers." "We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed," said Ron Gettelfinger, president of the UAW. Obama will be free to reopen the arrangement from the government's side if he chooses, an administration official said. Bush said, "The time to make hard decisions to become viable is now, or the only option will be bankruptcy. The automakers and unions must understand what is at stake and make hard decisions necessary to reform." Some $13.4 billion of the money would be available this month and next—$9.4 billion of it for General Motors and $4 billion for Chrysler LLC. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush 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 can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program. Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said. If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans. General Motors Corp. CEO Rick Wagoner said in Detroit that GM had much work ahead but he was confident it could reinvent itself with the government help and even lead an economic recovery in America. House Republican leader John Boehner called the administration's plan "regrettable." He said that granting loans for automakers was never the intention when Congress passed the $700 billion plan to rescue financial institutions and that the new plan "has failed both autoworkers and taxpayers." Rep. Jeb Hensarling, R-Texas, chairman of the congressional oversight panel for the Wall Street rescue program, decried the decision, saying a Chapter 11 reorganization, not loans rewarding decades of mismanagement, would have been a better decision. "Unless union contracts are renegotiated, and unless demand picks up for domestic autos, $14 billion, $34 billion, $74 billion—even $104 billion—will not solve the problem," Hensarling said. "I fear that a devastating precedent has been set that the federal government will now be pressured to bail out every failing company in America—something that taxpayers and future generations cannot afford." Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price. In addition, the automakers would be required to agree to limits on executive pay and eliminate some perks such as corporate jets. Paulson, who plans to discuss the deal with congressional leaders and Obama's transition team in the near future, 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. Friday's rescue plan retains the idea of a "car czar" to make sure the auto companies are keeping their promises and moving toward long-term viability. The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that. Kaplan said there have been discussions with Obama's aides throughout the process and the White House believes Obama's view of the problem and the solution tracks with theirs. The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for cars. The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories—many for the entire month of January—to cut vehicle production. Chrysler CEO Bob Nardelli thanked the administration for its help. In a statement Friday morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money. Ford President and CEO Alan Mulally said his company would not seek the short-term financial assistance but predicted the aid would stabilize the industry. "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mulally said.
Meanwhile, Biden speaks. http://blogs.abcnews.com/george/2008/12/biden-us-econom.html Biden: U.S. Economy in Danger of 'Absolutely Tanking' December 19, 2008 3:42 PM <!-- Jennifer Parker --> Vice President-Elect Joe Biden said the U.S. economy is in danger of "absolutely tanking" and will need a second stimulus package in the $600-billion to $700-billion range. "The economy is in much worse shape than we thought it was in," Biden told me during an exclusive interview -- his first since becoming vice president-elect-- to air this Sunday on "This Week with George Stephanopoulos." "There is no short run other than keeping the economy from absolutely tanking. That's the only short run," Biden told me. <script src="http://abcnews.go.com/javascript/portableplayer?id=6499566&autoStart=false"></script> Biden said he has canvassed Republican and Democratic members of Congress about a second "big" and "bold" stimulus package . He said the Obama team is focused on creating jobs and spending on energy and information technology infrastructure. "Every single person I've spoken to agrees with every major economist. There is going to be real significant investment, whether it's $600 billion or more, or $700 billion, the clear notion is, it's a number no one thought about a year ago," he said. The future vice president said the struggling economy will be the number one priority for the Obama Administration next year. "The single most important thing we have to do as a new administration, to have -- to be able to have impact on all of the other things we want to do, from foreign policy to domestic policy, is we've got to begin to stem this bleeding here and begin to stop the loss of jobs in the creation of jobs," he said. In a wide-ranging interview to air on Sunday, Biden gave his most extensive explanation yet on his role in the transition, and what specifically Obama wants him to do after the inauguration. We also discussed: - conversations he had with Sen. Hillary Clinton and President Bill Clinton about the State Department position; -the future of Guantanamo Bay; -the possible prosecution of high-ranking Bush Administration officials for their role in the prison abuse scandal; and what he really thinks of his predecessor, Vice President Dick Cheney. He also has some news on the dog front ... more to come. --George Stephanopoulos
Bush is a socialist, and Biden/Obama seem to be doing all they can to temper expectations and rapidly increasing the deficit instead of inspiring confidence. Hell, they will all still be set for life no matter what happens to the rest of us. Hope you've all saved some cash.
My take is that it's not good for the automakers to go out of business, obviously. First and foremost, the companies are responsible for huge sums of money in retired workers' pension funds. For decades, these companies have been blue chip stocks, too, so there's a lot of 401K and other retirement money at risk. Second, there's a lot of jobs at stake. As has been widely reported, the fall of the three automakers means 300K jobs (roughly) directly, but 3M jobs indirectly when you factor in all the auto dealers and parts manufacturers and so on. Third, everyone who already has a car would be impacted. No parts, no service. The downside of the bailout is a number of things. It's a horror to think of govt. owning any of our biggest companies, if any companies at all. Like it or not, companies should be run on sound fundamentals like profitability and not on political decision making like how "green" the company is. The Japanese automakers are suffering steep decline in sales as well, so it's hard to argue the cause is solely related to product quality. I don't see product quality of US cars being an issue in the least, frankly. Retooling the companies to build some other kinds of cars is what they've been doing for quite a while already; maybe it's a cause and not a solution? Since the companies and their workers are in serious trouble, it seems as if the cost of restructuring (on a company level) should be shared. The corporate jets and big executive salaries are not particularly the issue, but these executives need to take a cut or $1 for a year or something along those lines - as a symbolic gesture. The workers have to take significant pay cuts to address the expense side of the P&L equation. Take a look at the executive compensation: <table class="" border="0" cellpadding="2" cellspacing="0" width="100%"><tbody><tr class="yfnc_modtitle1"><td><small>KEY EXECUTIVES</small></td><td align="right"> </td></tr></tbody></table><table class="yfnc_datamodoutline1" border="0" cellpadding="0" cellspacing="0" width="100%"><tbody><tr><td><table border="0" cellpadding="2" cellspacing="1" width="100%"><tbody><tr><td class="yfnc_tablehead1"> </td><td class="yfnc_tablehead1">Pay</td><td class="yfnc_tablehead1">Exercised</td></tr><tr><td class="yfnc_tabledata1">Mr. G. Richard Wagoner Jr., 54 <small>Chairman, Chief Exec. Officer of Gen. Motors Acceptance Corp.</small></td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 3.36M</td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 0</td></tr><tr><td class="yfnc_tabledata1">Mr. Frederick A. Henderson , 49 <small>Pres and Chief Operating Officer</small></td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 2.31M</td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 0</td></tr><tr><td class="yfnc_tabledata1">Mr. Robert A. Lutz , 76 <small>Vice Chairman of Global Product Devel. and Acting Chief Exec. Officer of GM Europe</small></td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 2.31M</td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 548.00K</td></tr><tr><td class="yfnc_tabledata1">Mr. Thomas Stephens P.E., 59 <small>Exec. VP of Global Powertrain and Global Quality</small></td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 1.29M</td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 0</td></tr><tr><td class="yfnc_tabledata1">Mr. Gary L. Cowger , 60 <small>Group VP of Global Manufacturing & Labor Relations</small></td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 1.41M</td><td class="yfnc_tabledata1" nowrap="nowrap"> $ 0</td></tr></tbody></table></td></tr></tbody></table><table border="0" cellpadding="2" cellspacing="0" width="100%"><tbody><tr> <td height="2"><spacer type="block" height="2" width="1"></td> </tr><tr><td><small> Dollar amounts are as of 31-Dec-07 and compensation values are for the last fiscal year ending on that date. "Pay" is salary, bonuses, etc. "Exercised" is the value of options exercised during the fiscal year. </small></td></tr></tbody></table> Compared to about $7.5B in employee salaries. The company is losing $4B/year at its current rate. Figure out where that $4B has to come from to even things out. The UAW is not talking about the size of cuts they might take, they're talking "if" there are cuts to take. The Obama administration cannot be counted on to go against this big constituency of theirs. It will be interesting to watch it play out. Are the republicans right? Many of them are suggesting that chapter 11 is the way to go. While the downside is that people might shy away from buying a car from a company that's in bankruptcy (is the warranty going to be good?), the upside is that actual trained professionals (judges, lawyers, accountants) can analyze the situation and make the arrangements that are most suited to future success.
I will be the first to admit I am no expert on the auto parts industry, but this just doesn't make sense to me. Sure, I can see some auto parts manufacturers going belly-up. But is every company that makes auto-parts going to go out of business? And no new ones start? Because let's face it, auto parts are not that hard to make, and there will still be a market for them. Maybe there would be a temporary shortage of parts, but that only drives prices up and makes it more attractive to make auto parts. And no service? The big three, and the auto parts manufacturers, don't do service. Local repair shops do. Maybe if the big three go down hard, your warranty is void, but you'll still be able to pay someone to fix the car. Mechanics aren't going to all become astronauts when the big three fail. And there are always used parts if new parts are scarce for awhile. I'm not trying to say there won't be a big effect - there will. I just think it overstates the case to assume that everyone involved in the auto industry will be out of a job if GM declares bankruptcy. People will still be driving cars, and thus buying and fixing cars, whether GM exists or not. barfo
After Congress just spend hundreds of billions of dollars bailing out Wall Street, it would have been chickenshit not to set aside 17 billion for Chrysler and GM and not throw thousands and thousands of employees out of work, not to mention during a recession.
I want money too, give it to me (not really though, I'm fundamentally opposed to the upcoming 700 billion stimulus package)...what is that, like $2,000 for each american (under certain "conditions" of course".
One example, Bosch makes parts for the automakers. They'd be hurt by the big 3 radically cutting back on auto production.
I just wonder how much of this is, essentially, a subsidy for the unions. I'm not an expert on this situation at all, but as inefficient as management might be and as many bad decisions they might be making, my understanding is that fixed labor costs are so out of whack with competitors that without a systematic change they can't compete. I'm also interested to hear what the international/WTO-type repercussions are going to be. Ed O.
Definitely. And two years from now business would be booming as they try to help Honda, Nissan and Toyota meet supply for their influx of new vehicles. And in the aftermarket, well, the US automotive aftermarket is incredibly adaptable. If you can't buy the OEM AC Delco starter motor that goes into your 2003 Suburban, you can bet it won't be long before you can get a Carquest or NAPA brand starter motor.
The best argument I've heard for keeping the big 3 afloat is that it's a public jobs program. Given the current state of our economy, the last thing we need is a huge amount of layoffs.
http://www.google.com/hostednews/ap/article/ALeqM5jTG7SuUsayqE6bO9GPluAfU5blewD955I3P80 Reports: Toyota vehicle operations to post loss By YURI KAGEYAMA – 1 day ago TOKYO (AP) — Toyota's mainstay vehicle operations are likely to post their first ever loss for the fiscal year through March 2009, Japanese media reports said Friday, highlighting the dire conditions faced by global automakers. The Nikkei, Japan's top business daily, said Toyota's standalone operating result will be a loss for the fiscal year ending March 31, 2009. It did not cite sources. Kyodo News had a similar report. http://money.cnn.com/news/newsfeeds/articles/djf500/200812190843DOWJONESDJONLINE000648_FORTUNE5.htm The U.S. weakness continues to hurt once-immune Japanese auto makers like Toyota as well, Edmunds reported. Toyota's sales are expected to fall 39%, with <org>Honda Motor Co.'s<orgid value="NYSE:HMC"></orgid> (HMC) sales down 38% and <org>Nissan Motor Co.<orgid value="NASDAQ-SMALL:NSANY"></orgid> (NSANY) plunging 42% in December.</org></org>
If I don't give you the money are you going to throw tens of thousands out of work? Are you going to drive down the GDP further? Is somebody going to lose their house?
I'd still love to see the auto industry go completely non-union. $47 per hour...plus super bennies? C'mon, Jackson! Heck, I'd even be in favor of all of them operating as not-for-profit organizations until such point that they become 100% viable entities. If the government's gonna "incent" these guys, do it in such a way that highly promotes developing non-fossil-fuel-burning products.
I'm sure this bailout will encourage the US automakers to stop making inferior cars while spending millions in marketing in an attempt to hypnotize people into thinking that it matters how many horsepower/cupholders your car has when you're driving to Wal-Mart. Fucking seriously.
You think it's fair to harp on the auto execs for their perks but not on the union guys? http://www.foxnews.com/story/0,2933,472304,00.html Autoworkers Union Keeps $6 Million Golf Course for Members at $33 Million Lakeside Retreat Friday, December 26, 2008 The United Auto Workers may be out of the hole now that President Bush has approved a $17 billion bailout of the U.S. auto industry, but the union isn't out of the bunker just yet. Even as the industry struggles with massive losses, the UAW brass continue to own and operate a $33 million lakeside retreat in Michigan, complete with a $6.4 million designer golf course. And it's costing them millions each year. • Click here to see photos of the UAW's $33 million retreat. The UAW, known more for its strikes than its slices, hosts seminars and junkets at the Walter and May Reuther Family Education Center in Onaway, Mich., which is nestled on "1,000 heavily forested acres" on Michigan's Black Lake, according to its Web site. But the Black Lake club and retreat, which are among the union's biggest fixed assets, have lost $23 million in the past five years alone, a heavy albatross around the union's neck as it tries to manage a multibillion-dollar pension plan crisis. Critics call it a resort for union leaders that wastes money from union dues. "It's their members' money that they're spending on this thing," said Justin Wilson, managing director of the Center for Union Facts, a union watchdog group. "The union has bigger issues at hand than managing a golf course." Managing the course may become a burden for the union. The UAW covers costs for the Reuther Center from the interest it earns on its strike fund, according to tax documents, but massive losses in the past five years have forced the union to make heavy loans to keep the center afloat. Critics call it a poor investment for a group with over $1.25 billion in assets. "Unions certainly have had real estate investments in the past, but investments are supposed to make money, not bleed money," said Wilson. The UAW did not return calls from FOXNews.com, and a spokesman could not be reached for comment. The Reuther Center is open 11 months of the year to offer courses on leadership, political action, civil rights and other topics; it hosts nearly 10,000 visitors annually. The UAW says it sends workers there to "learn, experience unionism (and) commit to labor's cause," according to their Web site. The center was purchased in 1967 and underwent massive renovations in the '90s under the careful watch of former UAW president Steve Yokich. "Today's Black Lake might not exist if not for Steve Yokich," said union member Bob Reidt, whom Yokich appointed as Black Lake's director. "Yokich is responsible for rebuilding Black Lake." The UAW erected a monument to its longtime president Walter Reuther — the center's namesake — which bears an inscription of his words: "There is no greater calling than to serve your brother. There is no greater satisfaction than to have done it well." But Reuther, who died in a plane crash en route to the center in 1970, never knew the satisfaction of Black Lake's "well-groomed fairways," a course that Michigan Golf Magazine called a "stunning visual marvel." Union members can play golf at discounted rates on one of the country's top 100 courses, designed in 2000 by famed course architect Rees Jones at a cost of $6 million. The center has a storied history. Reuther had his ashes scattered at the site, and Lucille Ball and Desi Arnaz honeymooned there in 1940, well before it was bought by the UAW. "It's funny that they call it an education center — it's a resort," said Wilson. "If I was a union member, I would prefer that they rented out a room at the Ramada Inn."
