For some reason, Automotive News [AN, sub] felt compelled to write an op ed on Detroit's desire to hoover-up $50b in low-interest federal loans. As you might expect, the automotive news org of record is highly conflicted. So much so, the piece descends into double negativity by the second sentence. "Much of the political buzz about the federal government providing as much as $50 billion in low-cost loans to the auto industry can be chalked up to election-year ebullience. That doesn't mean it won't happen. But before automakers and suppliers cash any checks, there must be a better understanding of the process and any strings that might be attached." Ya think? Anyway, get this: AN supports the loans as long as Honda and Toyota are included– even though "it's hard to imagine that Honda or Toyota would borrow money from the U.S. government." But if the feds don't make an offer the transplants will refuse, "the loans would be nothing more than a Detroit 3 bailout. That would be a questionable use of tax dollars, even in an election year."
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Really and truly, if detroit lobby hard enough to get the idea of a bailout loan palatable enough for congress to swallow, then, I don’t think they’re are going to let something like, Toyota and Honda having to de facto rubber stamp, get in the way of $50bn.
I don’t care what any CEO says, Detroit NEED that money to survive and they’ll pull any trick in the book to get it.
Mind you, if this is true, then, it’s kind of ironic that Detroit’s future lies in the hands of Toyota and Honda…..
I understood that the loans were only available to retool plants that are 20 years old. That would only include 1 toyota and 1 honda plant as I understood it. Sounds to me like they are trying to exclude transplants. Should the transplants go ahead and ask for ‘loans’ just to keep detroit from getting them????
Rday :
I understood that the loans were only available to retool plants that are 20 years old. That would only include 1 toyota and 1 honda plant as I understood it. Sounds to me like they are trying to exclude transplants. Should the transplants go ahead and ask for ‘loans’ just to keep detroit from getting them????
You’ve got it right– as far as we know. At the moment. (The final rules have yet to be written by the Department of Energy, no less.)
Automotive News is being disingenuous. There is no way in Hell Toyota or Honda would DARE apply for those loans, even if ALL of their factories were eligible. They do NOT want to risk an anti-transplant backlash.
In fact, as far as they’re concerned, the loans are a very good thing indeed.
1) The loans will prop-up the domestics for a bit; the domestics set the floor for new car prices, which are plenty profitable.
2) If the D2.8 get bailout bucks and THEN go tits up, the backlash will be minimized.
Another danger of giving money to ToyoHon is that they might actually use it to retool their (one apiece) 20 year old plants to produce more fuel efficient cars, taking more market share from the 2.8
The problem I have with this subject is, $4.00+ gas renders the new CAFE standards moot until 7-10 years down the road. The Detroit 2.8 would have had a really tough time with CAFE in the 2012 time frame if their product mix was still like it was last year.
So the bailout, er, loan guarantees, that were supposed to allow the domestics to comply with new Fuel Economy regulations, are now turning into a handout just to help them ‘respond’ to market conditions. (Nevermind the fact that companies should never respond to customer needs – to be successful they have to anticipate.)
I think therein lies an important distinction: it’s one thing to give companies money to help them comply with the law (ok, even this is debatable). It’s a whole different thing to give companies money just because they can’t compete in a free market.
I’m conflicted on this one. One the one hand, I don’t want to see the Big 3 given a handout, essentially rewarding 30 years of complete mismanagement by incompetent suits. But at the same time, there is national pride in automakers, not to mention even in their smaller existence, the big 3 comprise some of the largest employment in the country; the government will be paying unemployment if they go bankrupt so why not try a bailout with the hope of keeping people employed. I have not done the economic analysis, but I’m curious how a $50b bailout compares to what the costs to the government (federal or states) would be if all three went under.
And consider this. If the tables were turned, and 20 years from now Ford and GM are kicking Toyota’s butt and Toyota is on the brink of bankruptcy, do you think the Japanese government would turn a blind eye? I think not.
I’m conflicted on this one. One the one hand, I don’t want to see the Big 3 given a handout, essentially rewarding 30 years of complete mismanagement by incompetent suits.
But at the same time, there is national pride in automakers, not to mention even in their smaller existence, the big 3 comprise some of the largest employment in the country; the government will be paying unemployment if they go bankrupt so why not try a bailout with the hope of keeping people employed. I have not done the economic analysis, but I’m curious how a $50b bailout compares to what the costs to the government (federal or states) would be if all three went under.
And consider this. If the tables were turned, and 20 years from now Ford and GM are kicking Toyota’s butt and Toyota is on the brink of bankruptcy, do you think the Japanese government would turn sit idly by turning a blind eye? I think not.
RF:
…get this: AN supports the loans as long as Honda and Toyota are included– even though “it’s hard to imagine that Honda or Toyota would borrow money from the U.S. government.” But if the feds don’t make an offer the transplants will refuse, “the loans would be nothing more than a Detroit 3 bailout.
An interesting statement. I take that to mean that cutting the deal would be an out-in-the-open admission that the Detroit 3 are incompetent, or otherwise unable to make a competetive/safe/fairly priced product and/or run their businesses.
A very bad realization. If it happens, then maybe, as a prudent self-serving consumer, I would need to include Ford and Chrysler in my “never buy from again” blacklist.
That would be a questionable use of tax dollars, even in an election year.”
Whether it’s a “loan” or not, We have to face the facts that there is less than average chance that the money be paid back. Then the taxpayer (me) is on the hook.
Which means that I have been forced to financially support something that I don’t want to support.
Therefore, I think it’s not only a questionable use of tax dollars, but an immoral one. Immoral because it forces me to pay for something that I philosophically oppose. I call it theft.
Immmoral also because it reduces the economic power that I and others like me wield when I/we make a CHOICE to support (what I/we think is) a deserving business with my purchase dollars.
If this was the last handout to the carmakers I could swallow it, but how likely is that? Bailing them out now just makes more bailouts in the future more likely. Nothing will have changed.
The “transplants” are employing people and building cars profitably in the USA. The US automakers need to learn to compete or be allowed to fold.
The problem I have with this subject is, $4.00+ gas renders the new CAFE standards moot until 7-10 years down the road. The Detroit 2.8 would have had a really tough time with CAFE in the 2012 time frame if their product mix was still like it was last year.
So the bailout, er, loan guarantees, that were supposed to allow the domestics to comply with new Fuel Economy regulations, are now turning into a handout just to help them ‘respond’ to market conditions. (Nevermind the fact that companies should never respond to customer needs – to be successful they have to anticipate.)
@Zoom Zoom
“Which means that I have been forced to financially support something that I don’t want to support.
Therefore, I think it’s not only a questionable use of tax dollars, but an immoral one. Immoral because it forces me to pay for something that I philosophically oppose. I call it theft.
Immmoral also because it reduces the economic power that I and others like me wield when I/we make a CHOICE to support (what I/we think is) a deserving business with my purchase dollars.”
Not sure what you’re feelings on this are Zoom Zoom so I’m not calling you out. But being raised as a pacifist and an American I find paying for our military exploits/excursions/snafus/misadventures/sanctioned murder to fall into the same classification as you pointed out above concerning the bailout. I’m curious if you agree with me on that…because when it comes to protecting “our way of life” (whatever the hell that is exactly) I find that US citizens RARELY find anything to be immoral.
Sorry to go off topic but I thought your definitions above were ver good and important to me.
As for the GM/Ford/Chryco bailout I’m disgusted how this is being framed as something to make sure they can provide the consumer alternative propulsion and cutting edge products. It’s a bailout pure and simple and I think the transplants should bully their way into the landgrab until somebody calls it what it is. I have no problem (for the most part) in helping a pathetically managed organization survive to make sure the middle-American jobs exist/survive but these bailouts should have some caveats with them; specifically that Rick Wagoner and the idiots who let him survive have to have their assets frozen and they must be fired and removed from the board. I’m sure I could come up with a list of 50+ candidates to be fired in about 10 minutes.
Considering it’s our tax money they are handing out I want to know if we get a lower price on the cars they make. Where is the real payback for the taxpayer?
Fewer people on the public dole will be the “reward”.