In the run-up to a $50b taxpayer-sponsored handout, Detroit is beginning to fret about congressional oversight/investigation (as detailed in our latest General Motors Death Watch). Detroit News Auto Editor Manny Lopez sees the danger. “GM, Ford and Chrysler are not charitable organizations though they’ve acted like it in the past with everything from labor contracts to benefits and executive salaries. They cannot afford to let that continue. They’re lobbying hard for direct government loans to help bring them out of their automotive abyss, but that can’t happen until they plug a few more holes in the proverbial belt and tighten it even further.” Notice the weak language: “a few more holes.” Yes, while Lopez praises Detroit for tightening-up on (i.e. suing) a handful of employees for violating employee discounts regs, and chides an unnamed automaker for serving non-proverbial “hand-battered pecan crusted whitefish” in its executive dining rooms, he only makes the previously mentioned passing mention re: executive compensation. Hello? Rick Wagoner banked $15.5m last year. Lopez’ half-hearted call for reform tells us that Detroit has more to worry about than it expects. A quick email to your senator would help in that regard.
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The letters have already been sent. Even copied GW too. We need to cut this off at the pass. We have better uses and needs for our money.
Rday – agreed. We’re dropping $10 billion a month on Iraq now. That $50 billion handout will keep us in Iraq another 5 months at least.
At least the Detroit News is coming (extremely slowly) around to see reality when it comes to the big 3.
It’s nice how every huge expenditure gets compared to the cost of freedom.
Isn’t there a difference between a loan (even a low-interest one) and a “handout?” (If the answer is “Yes, but this is still essentially a handout because of the opportunity cost of cheap money” then fine, but its not a $50b handout.)
The request for the loans is something granted under Section 136 of the Energy Independence and Security Act (the Advanced Technology Vehicles Manufacturing Incentive Program). While we’re on that topic, there are a lot of folks out there that qualified (or have kids that qualify) for low interest federally backed student loans and decided to partake rather than pay higher interest somewhere else.
Haven’t other countries participated in funding some of their automakers’ technology initiatives?
MichaelJ:
Would you loan GM your money?
RoweAS:
Since I’m a taxpaying American, I think I AM (or will be) loaning GM my money.
However, my point wasn’t to argue creditworthiness. My main point is that low interest loans that have already been made available by legislation passed last year keep being characterized as handouts, and the domestics have been criticized (in other editorials more than this one) for going after the loans that the government has made available.
I know this rant isn’t exactly on topic with Mr. Farago’s article, but…
You can criticize the government for using your tax dollars that way, although other countries have helped their own automakers in similar ways. But why criticize the companies? If you ran GM, and the company is in financial trouble, and someone offers you a low interest loan, would you say no?
MichaelJ :
September 4th, 2008 at 10:54 am
RoweAS:
Since I’m a taxpaying American, I think I AM (or will be) loaning GM my money.
However, my point wasn’t to argue creditworthiness.
Creditworthiness is exactly the issue.
It doesn’t matter if you call it a loan. If the “borrower” has no prospect of ever paying the money back then it’s a bailout.
pnnyj :
Thanks, that was my implied point.
They already have your money. The question is should they loan the money to the domestics in hopes of a recovery, or use the money on ethanol research or other pie-in-the sky programs for Energy Independence.
If the money goes unused, then who knows what will happen to it. It will be sent to Georgia (the country) or something. Nowadays it seems like every country in the world has one hand out for US aid, and the other hand is holding up the middle finger with an “F-U America” salute.
@highrpm: The government doesn’t have your money, or at least has spent whatever money you sent it twice and is already deep in the hole .
Any money lent to GM by the govt would have to be borrowed first…