Bush Announces $17.4B Auto Bailout

On Friday morning, President George W. Bush - yeah, the lame duck - waddled into the Roosevelt Room of the White House to announce his plans for an emergency bailout of the U.S. automakers, namely General Motors and Chrysler.

Ford Motor Company is a better financial position, so they were not included in this plan.

He intimated that under normal circumstances, he would just let the automakers file for bankruptcy, but in justification of his actions, Bush said:

These are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing. Additional loans may be available in February based on the availability of TARP funds.

Details of the plan are as follows:

• General Motors and Chrysler will receive loans from the federal government in the amount of $13.4 billion ($9.4 billion to GM and $4 billion to Chrysler) this month
  
  
• Financing will be drawn from the $700 billion Troubled Asset Relief Program (TARP) that was organized for the Wall Street bailout
  
  
• The loans are designed to stabilize the two automakers through March 2009, at which time they must show they are financially viable; If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury
  
  
• Conditions on the loans requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States
  
  
• Other conditions on the loans include placing limits on executive compensation and perks such as corporate jets, and requiring the automakers to adhere to fuel efficiency and emission standards and open books to government scrutiny
  
  
• An additional $4 billion will be made available in February, based on the release of funds from TARP

Bush's announcement comes one week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.

Because the bailout legislation failed in Congress, senior administration officials said that the loan package would essentially take the form of a contract between the government and the automakers. Officials said they expected those contract agreements would be signed by the end of the day.

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A New York Times article about the bailout points out, under the plan, Mr. Bush essentially handed off to President-elect Barack Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether G.M. and Chrysler are financially viable.

Mr. Obama and his economic team will have to make a convincing, public case that the wage cuts, plant closings and creditor agreements so change the landscape of the industry that the carmakers can turn profitable in short order.

But Mr. Obama will be under tremendous political pressure as well, because if his new team concludes that the automakers have not struck the right deals, it would mean a move to bankruptcy court, and likely widespread layoffs that would ripple far beyond the companies themselves.

Mr. Obama was elected partly with the enthusiastic support of the unions, who liked his talk of protecting jobs by renegotiating trade agreements. Now, in his first months, he will be asking them to give back gains they have negotiated over decades.

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plez sez: as expected, bush squeezed the last two drops of political capital from his faded political career to provide a temporary bailout to the us automakers - his post-presidential revisionist spin team will be at the ready to re-write history to show that "the us auto industry failed under Obama's watch!"

gm and chrysler will limp into the new year with a big box of money from uncle george, with both of their plants idle until late january or mid february. and i'm not convinced that chrysler will ever open its plants under the chrysler brand in 2009.

this loan comes with few strings attached (oh, they have to sell the corporate jet that they can't afford to put back in the air. ooooh, whoopie!) and good luck with getting the UAW to offer much in the area of wage concessions, after they've fought tooth-and-nail to get the compensation and nice pension plans their workers now enjoy.

as the new york times article so deftly stated, this stinking automakers bailout turd will be sitting on BARACK OBAMA's desk when he takes over the oval office on january 20th, since george bush has essentially washed his hands of this matter by giving the automakers enough money to keep them afloat until the inauguration of Obama. bush can now go back to packing boxes for his and laura's move to dallas in a few weeks.

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the federal government can't print enough money to keep the big three afloat until the end of this recession. these companies can restructure all they want, there ain't any credit available for few people who want to buy their cars! the reason for the plant shutdowns is that the inventory on hand isn't selling, so there's no need to make more cars.

okay, a show of hands: does anyone seeing this scenario of having few buyers for the glut of cars changing in the next four, eight, or twelve weeks?

...neither does plezWorld!

one of these companies - more than likely chrysler since it is so close to brink - is going to fail.

to my way of thinking, it's better to let them fail now rather than giving away untold billions of dollars that will never be recouped. this is corporate welfare (giving away money with no foreseeable way to retrieve the assets in the future) of the highest magnitude.

~ ~ Citations ~ ~

Read the New York Times article about Bush's bailout for the auto industry.

Read the Atlanta Journal-Constitution article about the auto bailout.

Read the CNN.com article about Bush's automaker bailout plan.

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Auto Company Bailout Dies in Senate

On Thursday night, the US Senate abandoned all efforts to fashion the passed House bill that would rescue General Motors (GM) and Chrysler (Ford claims it has enough cash to stay afloat). Senate Republicans refused to play ball and support a bill endorsed by the White House and Senate Democrats.

The failure to reach agreement on Capitol Hill may spell doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler potentially following close behind. While Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.

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After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009. The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.

Senate Majority Leader Harry Reid (D-NV) is quoted as saying, "We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line. It’s over with. I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight. This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight."

Speaking for the Senate Republicans, Sen. Mitch McConnell (R-KY) said, "We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves. The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work."

Moments later, the Senate failed to win the 60 votes need to bring up the auto rescue plan for consideration. The Senate voted 52 to 35 with 10 Republicans joining 40 Democrats and 2 independents in favor.

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There is still hope and the struggling automakers may get some money anyway.

CNN.com reports as part of their effort to urge skeptical Republicans to back the deal, Bush officials made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the Troubled Asset Relief Program (TARP), according to the sources familiar with the conversations. One of the sources said that a White House official made it clear to a GOP senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.

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Foreign automakers have been silent on the entire bailout plan. Toyota, Honda, Nissan and nearly all the other foreign companies that build vehicles in the United States have said little publicly concerning whether their American rivals should get the billions of dollars in emergency aid they have requested in recent weeks. To be sure, the companies themselves have little to gain by commenting on the bailout beyond expressing concern about the general health of the industry.

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Asian stocks sank deep into negative territory and the dollar fell to a 13-year low against the Japanese yen on Friday following the collapse of a $14 billion bailout plan for the flailing U.S. auto industry. In Japan, the Nikkei 225 share average ended 5.6 percent lower during morning trading after it became clear that the negotiations to bailout Detroit automakers had failed in the Senate.

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plez sez: much ado about nothing! the last act of the lame duck bush will be to bail out gm and chrysler... there is no way bush is going to let these guys falter before he hands over the reins to PRESIDENT-ELECT BARACK OBAMA on january 20th.

if necessary, the treasury will claw back some of the $700 billion wall street bailout money to keep detroit afloat for at least a few more months. and the bad thing is that this money will come with NO STRINGS ATTACHED! you can bet the gm ceo (wagoner) will hang around long enough to spend the windfall!

without a wholesale overhaul of their business practices, the detroit automakers are only prolonging the agony of their demise. plezWorld is convinced that at least one of the big three will fail within the next 12 months.

~ ~ Citations ~ ~

Read the New York Times article about how Asian markets sunk on news of bailout failure.

Read the New York Times article about the auto bailout failure in the Senate.

Read the New York Times article on the silence of the foreign automakers.

Read the CNN.com article about how Senate Republicans sunk the auto bailout.

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Auto Company Bailout Passes House

CNN.com report on Auto Bailout:

What follows are excerpts from a CNNMoney.com article on the House bill:

The House passed a stopgap $14 billion bailout to U.S. automakers Wednesday evening, but Republican opposition cast doubts about its fate as it moves on to the Senate.

The House vote came in the wake of an agreement on the measure earlier in the day between Democratic Congressional leaders and the Bush administration.

The bill is designed to keep General Motors and Chrysler out of bankruptcy through at least March to give the new Congress and Obama administration a chance to craft a more long-term solution.

The measure passed by a count of 237 to 170 thanks to overwhelming Democratic support. But only 32 Republicans joined Democrats in voting for the bill.

During the House debate, Democrats and Republicans from Michigan both expressed heavy support for the bailout. But virtually all other Republicans who spoke during the debate argued that it would not solve the problems dogging the industry. The White House so far has failed to generate support among Senate Republicans, who have the power to kill the bill when it shows up in the Senate.

The $14 billion is $1 billion less than what was being discussed earlier in the week, and less than half the $34 billion requested by automakers last week. Still it may well be enough to stave off the immediate threat of bankruptcy.

GM has said it needs $4 billion by the end of the month to continue operations, and believes it'll need an additional $6 billion in the first three months of 2009. Chrysler has said it needs $4 billion by the end of the first quarter.

Ford Motor, which has more cash on hand than its U.S. rivals, is not expected to tap into this bailout in the coming months.

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The stopgap measure is designed to let the new Congress and incoming administration of President-elect Barack Obama to craft a longer-term solution. It would also give the companies time to negotiate with creditors and the United Auto Workers union on additional concessions needed to stem their ongoing losses.

But the bill also sets strict oversight of the companies. There would be limits on executive pay, prohibitions for so-called golden parachutes and requirements that the automakers get rid of their corporate aircraft and not pay dividends while loans are outstanding.

The bill also provides for a presidential appointee, popularly referred to as a "car czar," to oversee the company's efforts to restructure their operations. If the car czar determines that the companies have not made progress on cutting costs, the loans would be recalled within 30 days.

In addition, the government would receive warrants - the right to buy a stake in the companies at a certain price - equal to 20% of the loan's value.

plez sez: horse whoo-ee! the house democrats have lost their collective minds.

fourteen billion dollars is not going to save detroit... not even for a couple of weeks! this is putting the proverbial band-aid on a cancer. one of the big three is going down and they'll be taking $7-10 billion of our dollars with them.

this is a market correction exacerbated by this recession. one of the big three is not supposed to survive and a lifeline is not going to save them. and because of this act, the house democrats may be looking at BARACK OBAMA presiding over the demise of the US auto industry as we know it, instead of them failing on george bush's watch!

the mortgage companies that got fat and then got skinny with those sub-prime loans... got a bailout!

the wall street brokerage houses that got fat and then got skinny propping up those sub-prime loans for the mortgage companies... got a bailout!

the US auto manufacturers got real fat and are now looking really skinny after foisting their "less than stellar" wares on a US public that now has numerous alternatives to their shitty products... is halfway there to getting a bailout!

the 1.7 million people - like plezWorld - who worked hard but watched their jobs blow away like sand on a hurricane ravaged beach since the recession began in December 2007 (there were 533,000 job losses in November 2008 alone)... get no relief, get no sympathy, and damn sure get NO BAILOUT!

who's next? what is the next industry with a powerful lobby in washington, dc that is going to belly up to the goodwill trough in congress. we're staring at over one trillion dollars in bailout cash heading to special interest groups without ONE PENNY of relief to the people who pay their taxes. there is something wrong with this picture... something is eerily wrong here!

i will be contacting my senators to urge them to vote against ANY bill that bails out the auto industry! i'll be checking tonight to ensure that my congressman (rep. hank johnson) voted against this bill.

~ ~ Citations ~ ~

Read and download a draft version of the auto industry bailout bill here.

Read the New York Times article about House passage of the bill.

Read the CNNMoney.com article about the bailout legislation.

Read the November 2008 Bureau of Labor Statics report and then see if you support floating GM and Chrysler for another two or three months before they come back to washington looking for another handout.

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Atlanta Commutes Changing

Four dollar gasoline is finally driving Atlantans from their love affair with gridlock and rush hour traffic. The Atlanta Journal-Constitution reports that traffic is down and MARTA (Metropolitan Atlanta Rapid Transit Authority) ridership is up... way up! The traffic in Atlanta is considered by many to be the worse on the planet, but there are indications that the sudden rise in gas prices are finally forcing commuters in the metro Atlanta area to consider alternate routes: MARTA, van pools, commuter buses, telecommuting, etc.

Atlanta's gas price has risen from $3 to $4 a gallon in six short months. The ARC ride-share database shows a 221 percent increase in car pool applications over the past year (May 2007 vs. May 2008), more people are considering riding with anyone who is heading to the same place. MARTA Rail ridership is up by 15 percent from a year ago. MARTA only covers Fulton and DeKalb Counties, other metro counties have express buses which feed into the MARTA System. Express bus ridership is up 67 from a year ago and there are signs that it will continue to increase as gasoline prices rise and folk have 30 to 50 mile drives into Atlanta. Douglas County vanpool ridership is up 160 percent from a year ago.

Read the entire AJC article on Atlanta's changing commuters here.


plez sez: i have one of those gas guzzling SUVs in my garage... and i leave it in the garage as much as possible. i consolidate trips, no more idling in fast food drive-thru - i go inside, only attend meetings that require my attendance.

i still wince and cuss george w. bush everytime i have to spend another $70 to fill that sucker up! thankfully, i'm able to get most of my work done from my home office, i cannot even imagine having to commute in atlanta's traffic... i would be on one of those express buses or at the MARTA station... no doubt!