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Status 2: The Big 3 Auto Bailout/Loan

December 9, 2008

Congress AutosWe have finally reached a consensus between Congress and the White House that a bailout/loan will be reached for the big 3 auto dealers.  Initially when the proposal was sent to the White House there was some opposition towards the way it was structured.  Bush much prefer that changes be made first before any money is given.

At first blush, White House officials suggested privately that the draft might fall short of principles behind a broad agreement to give long-term financing only to viable companies.

But it was reported shortly thereafter that the White House announced, via press secretary Dana Perino,  that there is a positive hope that a proposal will be approved this week.  How that will work out with Sen. Shelby we can only wait and see.  Shelby has stated, as early as yesterday, that he would filibuster any bailout bill for the big three should it reach the senate this week, even though he denies he has an agenda.

Nevertheless, Nancy Pelosi, House Speaker, feels that the vigorous negotiations with the Bush administration will ensure at least a $15 billion dollar package.  Pelosi has also warned that every one will have to contribute by making concessions.

House Speaker Nancy Pelosi, D-Calif., said negotiations were continuing with the White House, and lawmakers were hoping to create an auto industry that could thrive on its own — an effort she said would require concessions from management, labor, creditors and others.

It also should be noted that part of the conditions of the loan/bailout is that the auto industries must except an overseers (Car Czar) to ensure that the restructuring is taking place as required.

Earlier Monday, the White House and a top Democratic lawmaker said they were likely to strike a deal quickly on the multibillion-dollar bailout, which places strict restrictions on the automakers while they’re receiving the loans and mandates that the government overseer keep close tabs on their efforts to restructure.

The proposal also would give the overseer — a kind of “car czar” — say-so over any major business decisions by the automakers while they’re taking advantage of federal aid. The companies would have to open their books to the government, including informing the overseer of any transaction of $25 million or more and any “material change” in their financial condition.

Under the plan, the carmakers could get emergency loans right away. Then the overseer would write guidelines, due on the first of the year, for restructuring the Big Three automakers.

Basically, the government will effectively be taking over the car industries.  The new owner of the car companies would be us via our President Obama.  Normally, if Bush was still the president I would balk at such a notion; however, the picture changes with President Obama being at the helm.  The loan in itself is only to keep the companies (exception to Ford who is not as bad off as GM or Chyresler) viable long enough for President Obama to take control of the situation.

When it comes to a Car Czar that is considered and could be risky business.  Unless some one who has both engineering skills and innovative ideas can be tapped to fill the position I’m finding it hard seeing how the Federal Government can take over the company with being able to understand the real needs the companies will need to advance into the future.  You never know, under President Obama he might suggest just a Czar that institute the car industries become more deversified (trains, rails, buses, cars, etc.).  This will be one to watch and see how it developes over the next 3 to 6 months.

Enough said.

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2 comments

  1. I think there should be serious conditions put on this industry. Kevin Price, Host of the Price of Business Show said that the US Government should put reforms on the companies that include relocation. He has an excellent post at http://www.BizPlusBlog.com.


  2. I think we are all in agreement that their should be conditions and restrictions. However, I will not attack the unions for the sake of attacking unions. I went to the post you suggested and just as I suspected he used the false quote of $70 an hour as the rate the workers were being paid. It is unfair to blame the unions since they are not the ones that designed the cars or sent lobbyist to Washington to fight for deregulation for demodernizing cars.

    Using the models in Alabama and Indiana is also unfair since those companies use their countries health plans whereas the big 3 has no choice but to be forced to use our over bloated health care plans. Kevin has a point on conditions but he needs to get his facts straight (if he is uninformed) or stop pushing a lie.



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