Senate Majority Leader Harry Reid has cast doubt on the lame duck Congress’ ability to ram through another multi-gajillion dollar bailout economic stimulus package– upon which GM’s hopes currently reside. Automotive News [AN, sub] reports that the Nevada Democrat reckons that the dems have no chance of passing “a very robust, bold stimulus package” before the new team hits the field. At least not without those pesky Republicans lining-up behind it. AN correctly concludes that this is a septic tank full of Not Good for Motown– especially as GM has just publicly declared that they’ll be out of cash by December (a fact curiously absent from AN’s coverage). “The Detroit 3 and the UAW last week asked congressional leaders to include in the legislation $25 billion in loans for retired autoworker health benefit trusts, called VEBAs. They also want the bill to prod the Treasury Department and the Federal Reserve into releasing other federal money as ‘bridge’ loans to get the automakers through the current economic crisis.” Reid’s run the numbers and… “Until the first of the year, I still have a one-vote majority in the United States Senate,” Reid told CNN. “I’m senior enough and experienced enough to know that you can’t do something with nothing. I need votes.” And here’s the kicker: “The leader specifically mentioned only increased unemployment compensation benefits as a priority in a stimulus bill, not aid to automakers.”
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A bailout is moot if most folks won’t buy domestic cars.
I won’t buy one. No way.
What a sourpuss pic that is. Come to think of it, I don’t believe I’ve ever seen a pic of that man smiling…
Okay Robert, I think after having to look at that frightful one, we all deserve a cheerleader pic or two…
Quite frankly, Mr. Reid doesn’t have a whole lot to smile about. The government’s shenanigans have left them swimming in shark infested waters and the economy is bleeding profusely. Trying to save the crippled whales endangers everyone. Anybody got any lifejackets at least?
The banks bailout was so unpopular, Reid is correct, he can’t get it passed. Probably even with the new senate, he can’t get it passed. So – if the Bush Administration balks at providing funds, the Dems will blame the outgoing administration and say it is all their fault. The trap here is, if Bush refuses, Republicans lose Michigan, and maybe Ohio and Indiana, forever. So my guess, based on pure political calculation, is it goes through.
Just write off the states. Let them crash and blame the UAW and Democrats. Or, better yet, go Chapter 11, rewrite the contracts, and maybe the economies will pick up (at reduced pay scales).
RF: “GM has just publicly declared that they’ll be out of cash by December (a fact curiously absent from AN’s coverage).”
Perhaps that is because AN doesn’t share your extreme interpretation of GM’s press release. I know I don’t.
The trap here is, if Bush refuses, Republicans lose Michigan, and maybe Ohio and Indiana, forever. So my guess, based on pure political calculation, is it goes through.
The rust belt has finally leveraged itself politically in order to insure a constant and steady stream of political patronage dollars in exchange for continued loyalty (and votes). In other words, if either party pissed off the rust states by denying them tribute (i.e. bailout funds, etc.), the rust states deny them those all-important votes.
Now the question is whether the new administration will give in and give GM/Chrysler that $25 billion and then some (which will prolong this mess by a decade or less and further pad the execs’ golden parachutes), or treat both like the geek asking the prom queen for a date and let them down softly and gently with only meager crumbs thrown their way whenever they get too hungry. Who knows? It could go a completely unexpected way.
But Chapter 11 is out of the question. Because the execs will then be required to truly shape up their act. They don’t want to — too much money involved for them in behaving like incompetent failures.
Captain Tungsten:
They did admit that they’re effectively broke by the end of the year with only 16.2 Billion in reserve, approximately 14 Billion needed to run the company and a burn rate of more than 2 Billion a month. Based on their numbers, GM is insolvent by December. The only way they aren’t is if they can raise more capital, which they claimed able to do in the press release. But how? Sell Hummer? Sell the medium duty truck business? Sell all the staplers? If they had a way to raise cash, they would have done so to avoid the death notice on Friday. GM is circling the drain and it doesn’t look like the Gov’t is going to put the plug back.
Or, better yet, go Chapter 11, rewrite the contracts, and maybe the economies will pick up (at reduced pay scales).
Even though this has been discussed at length, the question needs to be asked again: will anyone buy a car from an automaker going through chapter 11? I wouldn’t.
People don’t want to buy their cars NOW, much less after a chapter 11, and even bailout money won’t change that fact. A bailout will only slightly delay the inevitable. With the way the economy is going people realise that they don’t NEED a brand new car every 2-3 years, that was only a luxury. People are now holding on to what they’ve got, and maybe now they realise that if modern cars can last up to 200,000 miles what’s the point of trading one in for a newer model in 2-3 years time. Maybe the brand new one will have some I-pod connectivity gizmo they don’t really need, big deal.
I think what pisses people off the most with talks of the bailout is the amount of money that unskilled UAW members are getting paid to slap cars together. Bring up the topic of bailouts and that’s one of the first responses you hear. Unskilled union members are getting paid more than some college graduates, for an automaking job that requires no experience or education at all. Not only that but the unions want healthcare coverage, pension plans, and they want job banks where they can sit around and still be paid if their not working. Given the way the economy and job market is in the world people are having a REALLY hard time feeling sorry for the automakers, and their overpaid workers.
If the automakers would have had some balls in the past they would have told the unions to go f*ck off, and they wouldn’t be in the current mess their in with healthcare, pension, and legacy issues. The union members want to make white collar middle class wages for a blue collar job. You could find people to do their jobs for half the money.
If the jobs the UAW people do are so easy and pay so well, why don’t all those super college grads take the jobs? They would rather do something else for less money? They’re too lazy? They can’t stand the drudgery? Must be some reason there somewhere. The last time I went through an assembly plant, that plant had just gone through a buyout of longer term employees and had hired lots of new people. The tour guide, a retiree from the plant, told me that a substantial percentage of the new hires quit after a week or three.
The 2.8 did very well in the truck and SUV markets, and those products were built under the same UAW contracts in force in the car plants. Maybe the problems was somewhere other than the assembly workers.
As for the bailout question, this country is in for a massive adjustment of attitude and expectations. It won’t happen overnight, so a bailout or two might be necessary to prove to all concerned that it isn’t the answer. We’ve been on a credit bender for years that has juiced the markets across the board: cars, houses, restaurants, etc. So I don’t think we’ll be buying cars at the 16+ million or so rate we have been, and we already had too much capacity.
There’s going to be lots of suffering in this downturn, so those who take pleasure in the suffering of others will be on a long-term high.
Matt51,
If the repubs balk (and honestly a little later even if they don’t), and the Big3 goes bankrupt, large numbers of voters currently beholden to organized labor, may find their future employment prospects tied to more pro competitive policies in the future. Which may well be advantageous to the GOP.
stuki,
Even if that is the case, the Republican brand has still been damaged beyond belief by W., and it’ll take a miracle for them to defeat Obama in 2012. Will they get it? We shall see…