Auto Makers: before and after crash
'Big Three' request bailout
Michael Mayday
Issue date: 12/4/08 Section: Beyond
The recent financial bailouts approved by Congress have given manufactures a reason to ask for federal loans. The latest requests are coming from Detroit's Big Three auto manufacturers: Ford, General Motors and Chrysler. The bailout loan requests started at $25 billion, but now the automakers are asking for $34 billion.
The requested $34 billion would help the automakers restructure while avoiding Chapter Seven bankruptcy, the form that oversees liquidation. Taxpayers would ultimately foot the bill, and to make up for it, the Big Three have told Congress that they will pay off the loan, make pay cuts for executives and sell off car brands such as Pontiac and Saturn. Ford CEO Alan Mulally and GM CEO Rick Wagoner said they'd accept a $1 yearly salary if they borrowed money from the government.
Congress will return next week to vote on the proposed loan package.
"The liquidation of the Detroit-based auto companies would have serious negative repercussions for the entire U.S. economy," United Auto Workers President Ron Gettelfinger said in an address to the Committee on Financial Services on Nov. 19. "Almost four percent of our nation's GDP is related to the auto industry, and almost 10 percent of our industrial production by value."
Gettelfinger added that if the bailout failed, the national economy would continue to collapse while unemployment in Michigan and abroad would spiral higher.
"Based on the reports that the manufactures are telling us, they'd run out of money in 2009," said Bruce Belzowski,
the associate director of Transportation Research Unit at the University of Michigan.
"Once government gets started in this thing, there's no bright line saying where it stops," said Professor of Political Economy Gary Wolfram. "The question is if you were to loan GM the money, is it going to take longer for them to be able to become profitable than if you just had them go bankrupt."
Instead of waiting for a federal loan, the automakers could still file Chapter 11 bankruptcy, which would allow them to restructure both management contracts with unions within their companies. However, Chapter 11 bankruptcy still requires massive amounts of money.
The requested $34 billion would help the automakers restructure while avoiding Chapter Seven bankruptcy, the form that oversees liquidation. Taxpayers would ultimately foot the bill, and to make up for it, the Big Three have told Congress that they will pay off the loan, make pay cuts for executives and sell off car brands such as Pontiac and Saturn. Ford CEO Alan Mulally and GM CEO Rick Wagoner said they'd accept a $1 yearly salary if they borrowed money from the government.
Congress will return next week to vote on the proposed loan package.
"The liquidation of the Detroit-based auto companies would have serious negative repercussions for the entire U.S. economy," United Auto Workers President Ron Gettelfinger said in an address to the Committee on Financial Services on Nov. 19. "Almost four percent of our nation's GDP is related to the auto industry, and almost 10 percent of our industrial production by value."
Gettelfinger added that if the bailout failed, the national economy would continue to collapse while unemployment in Michigan and abroad would spiral higher.
"Based on the reports that the manufactures are telling us, they'd run out of money in 2009," said Bruce Belzowski,
the associate director of Transportation Research Unit at the University of Michigan.
"Once government gets started in this thing, there's no bright line saying where it stops," said Professor of Political Economy Gary Wolfram. "The question is if you were to loan GM the money, is it going to take longer for them to be able to become profitable than if you just had them go bankrupt."
Instead of waiting for a federal loan, the automakers could still file Chapter 11 bankruptcy, which would allow them to restructure both management contracts with unions within their companies. However, Chapter 11 bankruptcy still requires massive amounts of money.
Viewing Comments 1 - 1 of 1
Rick Mayday
posted 1/19/09 @ 10:07 PM EST
Mike,
Look up a book "Car Culture" on Amazon. History of the Auto Industry is important to know here in USA.
Will send your M Twain book when finished. (Continued…)
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