Chances Dwindle on Bailout Plan for Automakers

[onehandle]

Source: New York Times

WASHINGTON — The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition during a lame-duck session next week.

At the same time, hope among many Democrats on Capitol Hill for an aggressive economic stimulus measure all but evaporated. Democratic leaders have been calling for a package that would include help for the auto companies as well as new spending on public works projects, an extension of jobless benefits, increased food stamps and aid to states for rising Medicaid expenses.

But while Democrats said the stimulus measure would wait until President-elect Barack Obama takes office in January, some industry experts fear that one of the Big Three automakers will collapse before then, with potentially devastating consequences.

Despite hardening opposition at the White House and among Republicans on Capitol Hill, the Democrats said they would press ahead with efforts to provide $25 billion in emergency aid for the automakers. But they said the bill would need to be approved first in the Senate, which some Democrats said was highly unlikely.

Read more: http://www.nytimes.com/2008/11/14/business/14auto.html

[terip64]

1. I can't even imagine what MI will look like if one of the three goes down. Scary shit. n/t

[liberal N proud]

4. It isn't going to devastate ONLY Michigan

GM has manufacturing facilities in 28 States
Ford had facilities in more than a dozen states
Chrysler has manufacturing facilities in at least 7 states

That does not include the dealers, customer service centers, other related facilities and all the suppliers who rely primarily on the auto industry to survive.

Then once those businesses are gone, all hell breaks loose on the rest of the regions economy, health care, entertainment, food, day care etc.

The depression will look mild in comparison.

[HereSince1628]

8. It is going to hit the midwest very hard, but then it's going to hit the US hard

The productivity of the auto industry generates the value (that becomes cash) that makes business communities funtion in the same way that photosynthesis provides the energy and assimilated nutrients that sustain ecological communities.

[sasquuatch55]

11. Let Big Oil bail out auto industry; not us.

nt

[Dover]

23. Makes sense to me......

And it's time for those states who have become overly dependent on the auto industry or any singular industry (a very dangerous plan to begin with), to diversify their economies.

We are seeing a forced migration of people out of these areas where businesses that were the sole engine of their areas are collapsing.

Of course these days, many companies view 'bankruptcy' as strategy, and opportunities to shed unwanted baggage such as union deals and pensions...

So we'll see what the actual endgame is for these companies.

[amandabeech]

28. Michigan has been trying to diversify since the 1970s.

That's when we were subject to the oil shocks resulting from Middle East turmoil. Detroit had been making the big cars that people wanted to buy when gas was 30-40 cents a gallon. Overnight, oil went to 75 cents and higher. I remember it very clearly because I had my own car then.

It become very clear that Michigan had to go for more than autos, and the state made its first baby steps into encouraging new businesses unrelated to autos or only partially dependent on autos to set up shop. I remember seeing commercials on TV in the '80s when I was in Connecticut and New York. They were called "Michigan--YES." It was a start.

Michigan has encouraged spin offs around its major universities, and when I was at U-Mich in Ann Arbor in the '70s, the computer geeks and some people from the biological sciences and the medical school were doing just that.

The state practically ordered U-M and Michigan State to bury the hatchet and work together. It was rough going at first, but now faculty and students from the two places collaborate regularly. Michigan Tech (formerly Michigan School of the Mines) was involved as well, but transportation to their campus is almost impossible now (its in a remote area of the UP in which both iron and copper were mined), and place is losing enrollment.

Currently, the State of Michigan has crated a high tech development partnership among the University of Michigan, Michigan State University and Wayne State University in downtown Detroit. They're having quite a bit of success around Ann Arbor and East Lansing and putting quite a bit of money in.

The partnership supports existing industry and is trying to make a name for itself in others, like waste cleanup and environmental technology, as well as biotech, agricultural science, engineering and computer science.

The state has managed to find money for start ups of every sort, but I don't know if that's going to continue as the state goes into extreme recession.

As to diversity, many people like you forget that there are other industries in the state, particularly outside the metro Detroit area.

Pfizer was located in Kalamazoo in SW Michigan, but it was taken over. Quite a few jobs still remain.

Dow Chemical is in Midland, MI, northwest of Detroit and is a big employer.

Grand Rapids is famous for office furniture, with Herman Miller and Steelcase in the vicinity. Of course, Amway is near Grand Rapids.

Kellogg and Post are still making breakfast food in Battle Creek.

There is quite a bit of specialty agriculture in Michigan, as well as considerable forestry in both peninsulas. Until copper prices broke recently, there were some companies prospecting for copper and iron in the UP with better equipment.

The auto industry is still huge, and I'm not sure that there has been the economic breathing space for other ventures, especially around Detroit. The state has to continue to fight for other businesses to come in, and Michigan does have a lot to offer--a skilled, educated work force, high quality state universities, low housing prices, a diversified product transportation system (roads, rails, good airports )including a new international airport in Detroit), and water around the Great Lakes), and wonderful summers and autumns.

However, its image problem as the rustiest of the rust belt is hard to overcome, as is the outdated reputation for having irresponsible unions.
Posts like yours indicate the depth of the image problem.

People, even those here on DU, often write about things based on outdated perceptions. I suggest that you read up on the situation in Michigan and dialog with some who live there now and some expats before you write untrue posts about a great state that's having a tough time.

[orleans]

19. check out this video from gm in sept. about how GREAT they are doing:

During GM’s Live Global Broadcast on September 16, 2008, Fritz Henderson, GM’s President & Chief Operating Officer, presented GM’s global standing.
http://www.youtube.com/watch?v=iBxJ_TAMNmU

[aquart]

2. "Apres moi, le deluge."

Translation: Bush hopes we die.

[boomerbust]

3. Coward Republicans

Want one of the Big 3 to fail. Bush must be jailed before he leaves the country.

[Truth2Tell]

34. Are the Democratic leaders REALLY going to

keep blaming "the Rpeublicans" for failing to pass bills, even now that we have such a huge majority?

Really? Give me a fuckin' break.

[mac56]

5. So the GOP's willing to rescue stockbrokers and CEOs but not auto workers.

Typical.

[Romulox]

6. Don't blame this solelyon Repubs. Chris Dodd shilled for the financials as hard as ANYONE.

While plenty of Democrats "crossed the aisle" to vote for a no-strings attached bailout of Wall Street, Dodd, Frank, and Reid will not fight for one of the most loyal blue states...

[mac56]

7. Well, shame on them too.

Time for them to rethink.

[HereSince1628]

9. I'm paranoid and wonder about the role of cultural biases of Coast vs. Heartland

as a factor in this decision.

[Romulox]

10. Yes, there is almost a HATRED of blue collar Americans amongst the coastal elite

and yes, that includes most Democrats.

[HereSince1628]

12. Well, maybe not hatred, but a hubris that midwesterners

lack eastern cultural sophistication and have a lot less importance to the grand economic scheme.

[Kolesar]

14. Union bashing run amok

We have heard decades of unsubstantiated dogma that union members are lazy and produce inferior products. I am sure the propaganda was the work of rich-Republican America. Now it snapped back and will destroy a big part of the economy.

Then they will just make fun of the Rust Belt residents as they had displaced coal miners and transient Oakies.

[WriteDown]

25. Having lived in both places....

this analysis is dead on.

[amandabeech]

29. Hatred of Blue Collar America is often seen right here on DU.

Sometimes I wonder whether DU has been hijacked by some hard core country club Republican forum.

[customerserviceguy]

24. There might be a perception of Detroit vs. other parts of the heartland

Yes, I know the big three have plants scattered all over the country, but as long as I've been alive, the American automobile industry has been synonymous with "Detroit". There may be some subtle racial bias going on here.

In any case, whatever solution is reached will require some consolidation. A hundred years ago, we had dozens of automobile companies in this country, there hasn't been a consolidation since American Motors merged with Chrysler a couple of decades or so ago. When I cannot watch a half hour of commercial television without seeing at least five ads for automobiles (manufacturers and local dealers) that tells me that there might just be too many firms involved in the business, and something has to shake out.

At least the Repukes don't get the opportunity to attach their pork to the final bill, we can give them the heave-ho on January 2nd. Be glad that Barack Obama gets to be President in January, when FDR took the helm in 1933, it was in March. The crash of 1929 had all of 1930, 1931, and 1932 to wreak its damage on the American economy, plus those precious extra months between the election and the inauguration to do harm. Our crash is relatively recent in this cycle, we will have our generation's FDR working on it sooner in the cycle. Plus, most all of FDR's legacy programs are still in place to deal with the misery of the common person, we will not have to invent and implement them from scratch.

[Romulox]

26. You nailed it. "Detroit" is a socially acceptable proxy for racial hatred. nt

[customerserviceguy]

27. Besides government

where else are such a high proportion of African-American workers fairly paid?

[AndyTiedye]

35. "Detroit" is More a Proxy for White-Elephant Gas-Guzzlers

When someone mentions Detroit, its racial composition is not the first thing that comes to mind.
We think of cars. Big old American cars that most of us remember fondly, but burn way too much gas.

Sending all the EV1s to the crusher while ramping up production of Hummers did not help.

GM needs the Volt, yesterday. Not so much because they will sell so many of them right away,
but because they need to change that image.

[AndyTiedye]

31. Doesn't Matter if they Do. Republicans Almost NEVER Cross the Aisle Anyway

Still, if they're going to filibuster, make them do a REAL filibuster, all the way through Thanksgiving.

[fencesitter]

13. let 'em fail...

they will not disappear, they will file for bankruptcy. They will reorganize. Many will lose their jobs, true. But the billions they are asking for can be used to shore up and extend unemployment benefits and training programs for workers, restructure pension programs. These companies hire a gazzilion lobbyists ti whine for them, gain our sympathy, shift the focus from the bad business practices year after year. I do not understand the Dems, who are supposed to be against corporate welfare, wanting to give them billions year after year. They got 25 billion earlier this year already. This money could be given as loans or grants to startup companies building truely inovative alternative fuel vehicles. They are out there, but cannot get money or are quashed by detroit. Detroit refuses to evolve and actually its' operating expenses are so out of control they can't evolve. Let them go.

[Kolesar]

15. Your post is so full of fallacies that I don't know where to start

They got 25 billion earlier this year already. *WRONG*

Detroit refuses to evolve and actually its' operating expenses are so out of control they can't evolve. *WRONG* It's a credit problem.

I reckon that you don't know what a balance sheet or a bill of materials is.

[orleans]

18. wrong? did you see this?

Bush signs $25B auto loan bill
Low-cost borrowing to retool plants approved as part of $634B spending package signed by Bush.
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- President Bush signed a $634 billion spending bill Tuesday that includes funding for $25 billion in low-cost government loans for the auto industry.

The landmark loan program will allow automakers to borrow money to retool plants to build advanced technology vehicles that are at least 25 percent more fuel efficient than currently required.

The program gives preference to plants at least 20 years old and sets aside 10 percent of the funds for companies with 500 or fewer employees -- such as startup electric carmakers and some suppliers.
"We commend the Congress and the President for their action at a critical time in the auto industry's transformation," GM spokesman Greg Martin said late Tuesday. "Now, we need the rulemaking process to keep pace with the urgency in which we're developing new technologies."

Bush signed the bill Tuesday evening and issued a written statement but did not specifically mention the auto loans, reflecting a split among his advisors on whether to back funding for the program. The White House ultimately refused to take a position.

Senate Energy Committee Chairman Jeff Bingaman, D-N.M., said late Tuesday he was pleased that Bush signed the bill.

Michigan lawmakers plan to return next year to seek another $25 billion in loans for 2009 and 2010, and more flexibility in how the funds can be used.

The low-cost loans will carry interest rates of about 5 percent and could save Detroit's Big Three more than $100 million per $1 billion borrowed. On the open market, the financially strapped companies would face interest rates of 15 percent or more.

Automakers would have up to 25 years to repay the money and could seek a five-year repayment deferment. Congress approved $7.5 billion to cover the costs of insuring the loans and deferment.

The loan program was created as part of the 2007 energy bill, which hiked fuel efficiency standards 40 percent by 2020, but was not funded by Congress. The United Auto Workers strongly backed the provision to make it more economical for automakers to keep production in the U.S.

The bill includes language requiring the Energy Department to draft final rules overseeing the loan program within 60 days of it becoming law. It also gives the department $10 million to hire outside consultants to help them write the rules. But Energy Secretary Samuel Bodman warned in a letter last week that it could take "six to 18 months or more" to approve and award funds.

Michigan members of Congress and others denounced that timeline as unacceptable.

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081001/AUTO01/810010350

[orleans]

21. this article was 10/1/08.

[Kolesar]

40. it could take "six to 18 months or more" to approve and award funds.

it is not "already done".

[amandabeech]

32. Yeah, that's right. Pennsylvania is great shape!

Killing the steel plants was great for Pennsylvania! But I suppose that your family wasn't involved. The social costs are enormous, if you haven't noticed. I sure as hell noticed when I lived in Harrisburg. And of course, our metals are often shipped across the sea in polluting vessels from countries that won't stand with us if we get into a real problem again. Yeah, killing industry is the way to go! Thanks for your short-sightedness!

You might want to read a little before you condemn the auto makers and claim that they can't or won't do anything. Although GM is the most difficult case, your views are somewhat uninformed and out of date. Google is your friend, and prejudice is not.

[OwnedByFerrets]

16. I'm so sick of the democrats saying " Those mean ole republicans

are gonna be upset with us if we "TRY" do to anything, so we better just sit over here in our corner and whimper."

[Phred42]

17. So they really can't make it until January 21 ?

Anyway - Put it through and LET Bush and the Republicans kill it!

MAKE them kill it!

[amandabeech]

30. GM may not make it til Jan. 21. It doesn't have the credit lines to keep going.

Chrysler could also fail, but the big problem is GM. It can't get credit.

Ford is in better shape and took out lines in 2008 that will last into 2009. Ford also IMHO has the better plan for using its share of the $25,000,000. It has a very strong European operation and it plans to retool many of its SUV, van and truck plants to make 2 small European vehicles here. Remember, Ford sold Escorts and Focuses very successfully in Europe.

I've seen brochures of the two new Fords at a dealership where I recently bought a pre-owned Taurus--it's in great shape and I really like it. Both were very well styled and sell like hot-cakes in Europe.

It will be a major re-tooling job, though, and probably will take 1.5 years to complete.

GM hasn't sold any of its European Opels here since the '70s. I had two and loved them both. GM still makes Opels in Europe, although I don't think that they are as popular as the Fords. I don't know if GM plans to bring them over or to bring in Suzukis or S. Korean cars.

Again, GM may not make it until Jan. 21 without more credit.

It would be absolutely devastating to the state, and to my family, particularly my 89-year-old Uncle who is dieing from congestive heart failure. He's retired from the old Fischer Body GM line in Grand Rapids. He needs his pension and at least a medigap policy. Jobs on the line are now and really were then physically demanding. He gave up current income in order to get the pension and health care benefits, and he voted for Obama, along with an awful lot of these old guys and their families, just like a lot of people like him in Michigan and throughout the Midwest. I hope that folks here will remember that.

[Phred42]

36. I still don'tget how this happened all of a sudden

This seems to have been a surprise to them - like they realized it right after the banking industry 'realized' their problem

[amandabeech]

37. I think that there are three factors at work.

First, GM was probably in worse shape that it had admitted.

Second, the credit market has really dried up. The boyfriend of an ex-roommate who is a small businessman says that none of his friends can get credit. GM is having trouble getting credit extended in the amount necessary because it really isn't in very good shape.

Third, GM's sales have plummeted. They are in worse shape than Ford. Part of the problem is that buyers can't get financing and GMAC isn't in good shape. If there's little money coming in, you either go out of business or get some loans.

[Phred42]

38. That's my point - GM KNEW they were screwed and said nothing for how long

[amandabeech]

39. My point is that this is fairly recent.

If the overall economy were in better shape, GM most likely would be able to muddle through in some form.

[OhioChick]

20. They must pass something.

Whether it be a bailout of sorts with stipulations or whatever, the Big 3 must be saved/helped.

[Occulus]

22. Good! Let the Republicans do everything they can to stop an auto industry bailout.

Let them go down in history as being directly responsible for the loss of three million or so American jobs.

It would be the death of the Republican Party for the foreseeable future.

[DU GrovelBot]

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[MadHound]

41. Good, let it go into bankruptcy.

We can rebuild a much better auto industry from the bottom up rather than trying to continue to patch things together with bailing twine and duct tape.

[Mari333]

42. I heard Pete Hoekstra on the radio yesterday addressing this issue

He basically said that Congress would be more then willing to work with the big 3, but when they are approached with conditions or asked to show Congress a 'plan' as to how they intend to use the monies, or improve their products (green cars), they just refuse to answer. Hoekstra said Congress is not about to just throw some money to these guys without a plan in place, and thats where its at. They just want a bailout with no questions asked, which isnt acceptable.
I am in MI, every little factory in this county is directly attached in some way to the auto industry. I expect it will go down in flames, but 30 yrs ago these guys had a chance to make a better product and they didnt. They are sowing what they reaped, and its too bad millions of people will lose what little jobs are left here.
Yeah, MI is already in deep sh*t. I guess we are all used to it now.

[amitta]

43. great news

finally a victory for taxpayers.(for now)