Detroit to get $15 billion to tide them over until Obama takes office
by Sam Abuelsamid on Dec 7th 2008 at 11:01AM 
After spending the better part of two days giving the CEOs of the Detroit automakers every indication that they were going to be hung out to dry, Congress has at least partially caved in to the reality a large number of constituents would almost certainly loose their jobs soon if nothing was done. Late Friday, Rep. Barney Frank (D-MA) announced that a tentative agreement had been reached that would see Detroit get $15-17 billion in bridge loans from the Department of Energy fund meant to help pay for development and tooling for advanced technology vehicles. That amount of money should keep the financial wolves at bay for at least a few months.
The hope had been to use money from the $700 billion financial bailout fund, but Treasury secretary Henry Paulson and the White House were having none of that. However, come January 20 they will no longer have control of those funds, and the Congressional Democratic leadership is hoping that the Obama administration will see things a little differently and agree to use some of that money help the auto industry. In the meantime, as long as a suitable number of votes can be mustered early next week, work on the Volt, and EVs from Ford and Chrysler can continue for a little while longer.
[Source: Reuters, Photo by Brendan Hoffman/Getty]
Reader Comments (Page 1 of 1)
Richard 11:14AM (12/07/2008)
You've got to be kidding me! Why not tax the gasoline that is currently at stupefyingly low prices so that it will spur sales of highly efficient cars? That's the true solution to this nightmare! It's a self funding solution.
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Sam Abuelsamid 11:17AM (12/07/2008)
The root cause of the crisis right now is not the price of fuel although I do agree that it should be taxed up to a higher price. Even efficient cars like the Prius are not selling right now, because the people who are most in need of these vehicles cant' afford to pay cash and they can't get loans. Until something is done about freeing up some credit (with some new standards to make sure that borrowers are in fact able to repay) the price of fuel simply won't matter.
ale 1:04PM (12/07/2008)
well said Sam, my hope is that the automakers use this money to continue- not change- their future vehicle timelines, they have planned a lot of good vehicles for our market, including the fiesta, the beat, and such, id like to see those built... how bout a diesel in one of those buddies o pals..
Sam Watson 7:28PM (12/07/2008)
I like the idea of having a green gasoline tax. Perhaps insuring that gas never drops under $3 a gallon again.
As for the credit markets: I still think the solution was easy. The government offers 40 year mortgages to people in dire straights but raise & fix the percentage rate 1-2% on the loan. thus the government makes money back, peoples payments go down & they keep their house thus supporting housing prices, and banks make their money back thus preventing the collapse of future lending - this time to qualified people. Everyone wins.
And I am pleased to see Detroit live on. This money is loans & not freebie as I understand it. So I don't see what the big deal is. particularly when you consider the factories won World War II for America. It is foolish & dangerous to allow the collapse and/or export of our manufacturing.
blah blah blah.. ;)
The Doodle 1:11PM (12/07/2008)
Ok er - 2 Things.
1.Richard from Post No 1. The price of gas and or the volume of electric cars being made - engineered, or purchased has absolutely nothing to do with this Article and or current situation.
2. Sam - It pains me to think that there are a number of people who may have actually believed congress was not going to bail these guys out - or somehow capitulate albeit temporarily to their whines - there is also no way Obama isn't going to bail / loan them the money. Which as seen below will be a huge mistake.
http://arsensox.blogspot.com/2008/12/occasional-digression-no-4.html
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Tim 2:11PM (12/07/2008)
Sam, you are WRONG!
You (congress and the corporate media) have it all backwards.
It's NOT the lack of credit that is killing the American economy. It's the fact that we have TOO MUCH DEBT!
We have been borrowing from EVERYONE in order to buy their foreign crap, pay for an endless welfare state and finance a global empire we simply can't afford. This SAME thing has happened to EVERY empire.
MORE debt won't get us out of debt. YOU seem to think that it's a good idea to borrow on a NEW credit card to pay off an old one while still trying to buy MORE crap will keep the economy a float. WRONG!
MORE borrowing or MORE fiat currency will only make the hole DEEPER and the depression HARDER and LONGER.
We MUST STOP importing so much CRAP and that means LOWERING our standard of living and living within our means until we can compete and become an EXPORTER again so that we can EARN enough to PAY OUR DEBTS.
This is going to hurt and CONGRESS is making it WORSE by debasing our fiat currency.
Do YOU pay your debts? Good! So must Congress and NOT by printing more fiat/debt currency.
We played. We had fun. The roaring late 90s - early 2000s were just like the roaring 20s. The party is OVER. Now we must clean up the mess and pay the bill.
Congress wants MORE alcohol! They are DRUNK on unlimited fiat currency.
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Chris M 3:16AM (12/08/2008)
Actually, it's both. The excess debt is a major cause of the lack of credit. With over 10 trillion dollars of available capital sucked into the national debt, that doesn't leave much to loan for more worthwhile things, like boosting business.
Economically speaking, borrowing money can be a good thing, but only if it is used in a way that brings a return on investment that exceeds the intrest cost.
Borrowing just to spend is silly, it just increases cost and increases debt.
jpm 2:45PM (12/07/2008)
In two months the big 3 are going to turn it around and we'll all have confidence in the quality of their vehicles, sales will pick up, it'll all be so wonderful. Yeah right give me a fuckin break. We all know they're going to eat shit and go bankrupt....there goes more of our tax dollars down the drain.
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Mike T 6:11PM (12/07/2008)
Democracy is dead. No incentive for GM and others to produce good-looking, intelligent, fuel-efficient, durable vehicles - just ask the socio-liberal government to bail you out every now and then. They're not failing because other car makers in other countries get government help - they're failing because of what I said in my second sentence. It's simply BS that gigantic corporations are afforded billions in bailout money just because they're gigantic. Sure it would hurt for a while if they went belly-up but in the long run everyone would be better off. New auto makers would emerge with hopefully something that can compete with the successful Japanese and others. Either you believe in a free-market economy or you don't. The bottom line is - for anyone in their 40's and up can tell you - the US is becoming more and more Socialistic and let's really watch it get crazy with Obama and all of his looney left Congressional majority. Just say "NO" to corporate bailouts and "YES" to free-enterprise where only the smartest, strongest survive.
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mythicalprogrammer 8:11AM (12/08/2008)
Whoa whoa why are you blaming us liberals? I didn't vote for BUSH. And if I remember correctly Bill Clinton didn't put us down the toilet it was Bush's stupid war and spending spree. You're one of em blind idiot that put that Village Idiot in the one house in the first place and raped out economy and THEN BLAME THE LIBERALS! You know who fucked up our economy in the last EIGHT YEARS? IT"S FUCKER LIKE YOU THAT VOTED FOR BUSH. Why don't you use a pencil and stab your eyes out you blind fuck?
"The bottom line is - for anyone in their 40's and up can tell you - the US is becoming more and more Socialistic and let's really watch it get crazy with Obama and all of his looney left Congressional majority."
It was never a true capitalistic government in the first place! The new deal was a socialistic program by a Republican president. If you want to rewrite history then can you do it in a 1984 setting? Oh yeah thanks for fucking our economy you neo con whore.
mythicalprogrammer 8:17AM (12/08/2008)
Correction:
Hmm FDR was democratic oops. TR was repub. Herbert Hoover was repub.
jpm100 9:32PM (12/07/2008)
Nice. I have someone smurfing me who's an idiot.
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Jeff 10:02PM (12/07/2008)
January 20, 2009.
I'll be eagerly expecting my government handout.
Hey, 10.5 trillion isn't THAT bad of a debt...
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JerseyGeoff 11:19PM (12/07/2008)
Ok, tide them over for now but let's put out a better idea for the new administration :
A Better Bailout Plan
For years now, the Big Three automakers have been unable to produce cars competitively, largely because they have to buy their employees’ and retiree’s healthcare through private insurance whereas workers in all other industrialized nations are covered by cost-effective national healthcare plans. Even the foreign manufacturers who produce here undercut Detroit by recruiting a younger, healthier workforce.
Now that the bottom has dropped out of the market, the Big Three are facing certain bankruptcy and need a bailout, possibly for loans to fund the $51 billion they owe to the VEBAs they promised to set up for their retiree’s healthcare. However, the VEBAs will purchase health insurance through private, for-profit, higher cost providers as compared to Medicare, with only a 3% overhead.
Before dumping billions of taxpayer dollars onto Management and stockholders, wouldn’t it far better to nullify the VEBA’s and to allow the UAW workers and retirees to be the first to enroll in a program based on the Conyers-Kucinich Bill (H.R. 676), an expanded Medicare with no premiums, no deductibles, no co-pays, and no hassles. Like Social Security, the H.R. 676 program would be funded by a payroll tax of 4.5% from employers and 3.3% from employees.
Will this save money for Detroit? You bet. It will immediately cut thousands per car and truck off unit costs while requiring only incremental and smaller taxpayer assistance. If we’re going to bail out the Big Three, let’s do it in a way that solves a real problem that is strangling U.S. manufacturing; the burden of private health insurance.
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exectec1 11:52PM (12/07/2008)
Did anyone notice the wave of insider activity on 3/20/2008. Almost every high level officer exercised options at $0/share and then conducted a disposition on the non open market for $19.15/share?
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jcwinnie 12:17AM (12/08/2008)
They will be back for more.
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Tim 9:38AM (12/08/2008)
Yes, they will be back for more because socialist central planning is a bottomless pit and a law (Constitution) ignored by the enforcers does not exist at all.
Joe B. 1:37PM (12/08/2008)
Gas on taxes? How about taxes on coal plants, big eighteen wheeler trucks, and oil companies?
Carbon credit trading is coming.
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