President Bush's announcement that a multi-billion-dollar government backed loan will be available for faltering General Motors and Chrysler was the topic on today's News Talk Online on Paltalk.com.
The president, who undoubtedly consulted with President-elect Barack Obama first, said that allowing the auto industry to collapse "is not a responsible course of action."
In this, he is right.
Many Americans, dubious over the bailout plan for Wall Street, are less-than-enthusiastic about the government lending two of the former Big Three automakers at least $13.4 billion. But emotional responses aside, to fail to act would, as the president's father might say, not be prudent.
The ripple effect on the already devastated economy if the auto industry should fail is nearly incomprehensible. Many of us lament the fact that we are hurting while the fat cats are getting government bailouts. Fair enough. But the hurt will become more pronounced if GM and Chrysler fall.
Even the stronger auto companies would suffer. Because they all share some suppliers. Take two auto giants suddenly out of the equation, then suppliers may close shop too. So this plan actually helps protect GM and Chrysler's competitors.
By the way, this is not a bailout. It is a loan. True, it may turn out to be a poor investment. The government may never recoup the money it lends. But then again, it may. The last such time the government stepped in with loans to back a car company was when it propped up Chrysler. And that turned out to be an excellent investment. The money was returned, with dividends.
A poorer investment would be no investment at all. The results of which would be an even weaker economy, more people laid off, more people on welfare rolls and in unemployment lines.
If nothing else, President Bush's actions today were the lesser of two evils.
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9 comments:
This loan or 'bail out' as I prefer to call it, is the irresponsible course of action. To get there we must assume, that a "collapse" will leave us without a Car Industry. Nothing could be further from the truth. The Car Comapanies will have to reorganize, true, they will have to renegotiate labor contracts, and they will have to totally reorganize their management, and marketing. True? Maybe, but the fact remains that the entire auto industry is in trouble, witness the fact that even Toyota, is posting it's first loss.
The problem here, as is being constantly told to us, is the overall credit crunch, there are plenty of people willing to buy cars, but only very few are qualifying for the loans necessary.This is not just an auto industry problem, but a problem that is plaguing every single industry in the entire world.
Fix that problem, and the car industry's problems will go away, as will problems in the Housing market, and other 'necessary markets as well. Bebe_zilla
Personally, I am both Glad and ticked off by this announcement, this move will save hundreds of american jobs and keep us in the game of Manufacturing SOMETHING. ont he other hand this could be one last attempt by the republicans to break the Unions in favor of Management. Let's face it, they have been ITCHING at the chance to break the unions and give management carte blanche to exploit the average american worker. That being said, I am glad George is finally doing something RIGHT for once.
While nobody really likes the idea of taxpayers money being used to prop up private corporations, the alternative of allowing huge companies who employ thousands of people to go to the wall and the knock on effect that that would have throughout the economy would be too heavy a price to pay.
Hopefully the money will be paid back with interest as is the case with the money lent to the banks.
Even Margaret Thatcher, who was not known for her socialist proclivities propped up British Leyland in the 80s.
I too would have to agree that the bailout is an unfortunate evil in the current economic situation. If out government allowed these two giants to fail it would cause a domino effect worldwide. In Canada alone they estimated over 600,000 Canadian's employed in the auto outsourcing agreement Nafta brought would lose their jobs. This would cripple this small but essential cog to keep the wheel greased. I just think there needs to be major restructuring and reform. Regulating worldwide trade, banking and partnerships to insure out economy as well as independent countries worldwide are based on the same rules and regulations.
Gary I am afraid the "loan" to the Big 3 Automakers will, after all is said and done, only be throwing good money after bad... The Auto Industry will not be allowed to take all of the steps necessary for it to survive. The industry is in need of a massive reorganization, one that will allow them to avoid all excessive expenditures. That is clearly not in the plans because there will be no attempt to eliminate the excessive costs of labor.
The Automakers would like to shut down their plants for a short period to Reduce Labor costs and dispose of excess inventory... Many people can not get a loan to purchase cars and others are simply not buying because of fears of what will happen in 2009. To top that off they must pay the furloughed workers 95 percent of their normal pay.
It would appear that the proposed loan is to insure workers receive their full pay until the companies fold. They will have to cease production until sales recover and that may never happen. But they will still have to pay the workers 95% of their pay, a formula for failure.
I say the Big 3 should go into immediate Reorganization Bankruptcy (Chapter 11) and let a bankruptcy court guide them through the process. Renegotiation of Labor Contracts and Overhaul of Management and Marketing. Something must be done about the Auto Industries own Ponzi Scheme, Billions of dollars in unfunded retirement accounts...
The Bush Administration would like to help the automakers while the Obama administration would probably prefer to Nationalize them....
Chrysler announces its closing all its plants for a month and GM threatens plant closings. Why has America has made a habit of rewarding failure? These companies have been in business nearly 100 yrs and a few bad years and they are broke!! Maybe if these companies would have stuck to making cars and not becoming finance companies their problems wouldn't be so severe.
Bush announces this loan (with strings attached) where big 3 have to prove viability by March 31 or the loan has to be paid back. Who is able or willing to buy new car's today anyway? With the economy shedding jobs rapidly and credit markets frozen with banks apparently hording the bailout cash.
After this dismal shopping season expect 100's of retail chains to announce 1,000s of store closings after the first of the year. Will the Commercial RE industry be next in line for a bailout? When and where will it end?
Capitalism has been replace by nationalization and socialism.
How can the American Auto Industry can prove its viable or competitive in 3 months? Its had 20 yrs to do so and hasn't. China will soon start flooding the market with inexpensive automobiles. If major concessions aren't made by the UAW and CEO's. Chrysler's CEO Iococah ran the company for a $1 a year in the 80's and this only seems to be delaying the inevitable failure of the American Auto Industry. The Government sold America a bad bill of goods called Free trade. This is proof it is anything but free.
This loan or bailout cash will most likely be used to relocate the American auto industry overseas and Latin American countries. This appears to be the only way they can become viable.
At least another Bailout was avoided and this cash will come from the initial bailout. Printing more money at this point will only make the hyper inflation coming worse. This is already going to be a big problem and will soon cripple American's ability to make ends. Additionally, a decrease in America's AAA credit rating is most likely coming soon.
I don't een know where to start on making any comments about this. we are no longer supported by gold, we just print more money!!! The changes taking place or so rapid that they are happening right before our eyes , falling in all directions. Apparently Eoropean and Asian countries receive back up from their governments, and perhaps this is what we need to be doing, but we don't want to nationalize the auto industry either. The total economy is bound to have further failures before there is a turn around. We must not panic in this, and this certainly the time to reach out to those who have lost their jobs. We are all in this around the world, Jamie_38
What Britzer didn't point out about Thatcher bailing out British Leyland is that it in fact marked the beginning of the end for the company, and certainly was the major cause of breaking the stranglehold of the Unions in the UK. At British Leyland the fat cats still continued to draw large salaries..... the product declined and became less and less popular, and eventually the company was sold off to foreign interests - those foreign companies 'cherry picking' the brands that still had some life in them.
Now the recession is beginning to hit the foreign companies that bought out the old British Leyland product and still manufacture in the UK are feeling the pinch are now asking Gordon Brown for a handout! Can you believe that?
Maybe it's time to stop throwing good money after bad in both countries.
The Gary is a well known Reporter. whatever he says in his report is appreciated.
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