DawgTalkers.net Forums DawgTalk Tailgate Forum Bush gives automakers bailout loans...

started a new thread because the other is pretty big....

looks like the big 3 will have some time to restructure....


Link to article


WASHINGTON - The Bush administration came to the rescue of the troubled U.S. auto industry Friday, offering $17.4 billion in loans in exchange for concessions from carmakers and their workers.

"Allowing the auto companies to collapse is not a responsible course of action," President George W. Bush said. He said that a bankruptcy was unlikely to work for the auto industry at this time and would deal "an unacceptably painful blow to hardworking Americans" across the economy.

An official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.



An additional $4 billion could be available in February.

At the same time, Treasury Secretary Henry Paulson said Congress should authorize the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions.

Paulson said the use of the rescue fund to provide loans to the auto industry along with a string of other rescue efforts means that the administration has now basically allocated the first half of the largest government bailout program in history.

He said he is confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market event if one should occur before Congress approves the use of the second half of the rescue fund.

Bush said the auto rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.

If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.

"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.

"The American people want the auto companies to succeed, and so do I," Bush said.

Bush said the auto manufactures have faced serious challenges for many years: burdensome costs, a shrinking share of the market and plunging profits. "In recent months, the global financial crisis has made these challenges even more severe," he said.

The president said that on the one hand, the government has a responsibility not to undermine the private enterprise system, yet on the other hand, it must safeguard the broader health and stability of the U.S. economy.

"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers," he said.

The bridge loans could stave off the prospect of an “orderly” bankruptcy, one option that was being considered by the U.S. government after more than a month of wrangling.

GM and Chrysler have been forced to idle plants and lay off thousands of workers across North America as they try to shore up cash and have warned they could face bankruptcy without federal assistance.

GM said the short-term loans would help preserve jobs and "lead to a leaner, stronger General Motors."

"We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress," the automaker said.

No automakers have been spared in the brutal global sales slump.


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Japan’s Toyota Motor Corp could report its first annual parent-only operating loss in 71 years in the year to end-March, and may issue a profit warning at a scheduled year-end news conference on Monday, Japanese media reported.

Toyota, which declined to comment on the reports, last posted an operating loss in its first year of operation in 1937/38.

Automakers everywhere are under huge pressure to cut costs as a global recession and tight credit strangle demand, and Japanese carmakers are feeling the extra pinch from a strong yen.

In perhaps the strongest protest since the dollar soared to a 13-year high recently, Honda Motor Co CEO Takeo Fukui warned a strong yen would cripple Japanese industry and trigger mass layoffs, forcing the automaker to shift production offshore if it persisted



"Under ordinary economic circumstances, I would say this is the price that failed companies must pay," the president said. "And I would not favor intervening to prevent the automakers from going out of business. But 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."

Chrysler CEO Bob Nardelli thanked the administration for its help.



In a statement Friday morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

Ford President and CEO Alan Mulally said his company would not seek the short-term financial assistance but predicted the aid would stabilize the industry.

"The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mulally said.

General Motors said the short-term loans would help preserve jobs and "lead to a leaner, stronger General Motors."

"We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress," the automaker said.

No automakers have been spared in the brutal global sales slump.

Japan’s Toyota Motor Corp could report its first annual parent-only operating loss in 71 years in the year to end-March, and may issue a profit warning at a scheduled year-end news conference on Monday, Japanese media reported.

Automakers everywhere are under huge pressure to cut costs as a global recession and tight credit strangle demand, and Japanese carmakers are feeling the extra pinch from a strong yen.

Even without currency pressures, U.S. automakers are bleeding cash, raising the prospect of a bankruptcy that would severely disrupt the entire industry, add to growing jobless lines and deepen a global economic slowdown.

One remaining uncertainty is where the bridge loan would leave Chrysler, widely considered the weakest of the big three U.S. automakers.

Nardelli said last month the privately held automaker needs both taxpayer-backed loans and an alliance with one or more automakers to survive.

More recently, Nardelli has said the automaker could restructure to emerge as a stand-alone competitor, but most analysts are skeptical of that because of Chrysler’s heavy reliance on the deeply depressed U.S. market and its inability to fund new vehicle development programs.

Cerberus Capital Management, the private equity firm that bought 80 percent of Chrysler from Daimler AG, has retained advisors to study a range of options for the No. 3 U.S. automaker, including selling off its most valuable assets, including its Jeep brand and its minivan line.

From Friday, the No. 3 U.S. automaker will be shutting all 30 of its plants for at least a month in order to keep inventories of unsold vehicles from building further.

Both GM and Chrysler have said a bankruptcy filing is not an option they would choose because of the risk that it would drive more consumers away from their brands.

The Detroit-based automakers have also said a bankruptcy filing by one could topple suppliers and endanger the remaining two companies because of the overlap in their key parts suppliers.


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Ford is not seeking emergency loans but has asked the government to consider standby credits it could draw on if its own position worsens more than expected in 2009 or if Chrysler or GM were to fail.

GM and Chrysler have been hard hit by the sudden tightening of credit since September, a development that has made it harder for their dealers to carry inventory and for consumers to find financing.

GM’s sales in the U.S. market dropped 41 percent in November and are down 22 percent so far this year, while Chrysler sales have dropped 28 percent.

I don't see how they'll pay this back. Nobody is buying new cars because everyone is worried the economy will tank farther and the only way the Big 3 make it out.....is if people start buying their cars (which ain't gonna happen).

Stupid.

I only hope that when they sell off the pieces of their companies, the US gets the money to pay us back.

The terms of this loan gives the companies to March 31st to do something they haven't done in 20 years...be viable. What happens when they burn through this money? How can they repay the loans? Get another loan?
This money isn't going to make people buy cars or make banks give a loan to get one.

People are still buying cars, but now it's just the financially secure, and the not the credit risky. So the numbers are way down.

Add that the price of gas is at a long time low, dealers are offering a lot of deals, and people who were on the edge of a new car, will go ahead and buy one.

At some point, repairing an old car isn't economically sound.

Oh ya, there will still be car sales when the NEED is there. However, car sales are down across the industry due to low confidence in the market. And I wonder how many people will be buying a car from the Big 3 when they don't know if they'll be around for the limited life of the car.

The car dealerships are saying even the credit worthy are not getting the loans they need to buy a car. Which shows the failure so far of the bank bailout.

Oh yeah, sales are down. The dumb thing is, some dealerships will lay off the parts/service people to save a buck in these lean times, rather than layoff ineffective sales people.

The hubs keeps wondering when he'll be laid off, because that's just the way his dealership would handle the situation. I mean, he's only a parts guys, we don't need those, right? But we do this sales guy that hasn't sold anything in 5 weeks and hasn't even come close.

Sorry, a brief rant about the hubby's dealership and how they operate.

Aren't the salesmen commission based? So they don;t really cost the dealership much.

Maybe it's just different down here.

I see a car with new tags almost everyday still.

That's just the dealers using their cars so they don't have to pay the gas! lol. J/k. Thought it was funny.

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Oh yeah, sales are down. The dumb thing is, some dealerships will lay off the parts/service people to save a buck in these lean times, rather than layoff ineffective sales people.

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How do you know which is which... I mean,, if nobody is selling cars because the economy is down, then which sales people are the ineffective ones? How do you know.

The difference is that the Parts guy makes a decent hourly wage... the Sales guy doesn't really cost them a dime because he is all commission.

So... who do you think you'd let go if you had to cut costs?

Initially that is what I was thinking but (our) GM and several other people I have heard from have said it's people with pretty darn good credit. I think it's also pretty common knowledge that the credit market is not opening up like they had hoped with the bailout. They aren't lending that money.

Talking to a sales guy down here at the local dealership in Key West, he's having a hard time getting a loan for anyone with less than a 700 credit rating. And he's not getting the "good rates" for anyone with less than a 750 or so.

Very good move on W's part. He saved them from collapse, which despite the chatter of some, would have been a disaster. Both economicly and for American workers.

But he put conditions and requirements that will force changes to make them more competative before any further money is doled out.

Too bad he wouldn't do that with the brief case crowd. But hey, he helped and in a smart way.

My hat's off to him!

I can't say as far as new loans go ....... but i just contacted my auto loan company, and told them that i can get a loan for 1.5% below my current rate, and asked them what they were going to do about it.

They cut my rate from 6.99 to 5.49% without me having to do a thing. (other than calling them)

I just might call my mortgage company and my credit cards as well.

Oh, I know he's in a crap situation, and believe me, if the economy were better, he'd be out of there. But yes, he has a base salary and then he earns commission on the "sales" that he makes. Seems to be pretty par for the course around here. He was offered 2 other parts jobs in the area, but the hours and pay were even worse than he already makes. So for pay for the area, for the industry he does pretty well and he enjoys what he does, but he HATES his boss (lives up to his first name of Dick) and hates his commute (Akron to Bedford 33 miles each way everyday during rush hour through a massive construction zone). Though, he would take a small pay cut if he found something closer to home - less commute = less time in the car = less gas being used = less money spent just to get to and from work.

Really, he just needs to get out of the automobile industry altogether (well, unless he can find a gig with a pro-race team... ). Here's hoping.

I just can't believe a dealership owner would be stupid enough to put his parts guys on commission. All it does is cause consumers to be ripped off.

2 of GW's greatest accomplishments will be

1 bailing out the auto industry

2 protecting great lakes water

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DC When the banks don't consider an older couple with a 835 credit score, a home they own free and clear, that has never been late on a payment in the lives as not worthy for a loan then something is really wrong

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No kidding.. That story cracks me up GM,,,, When you told us all that on another thread, I think it tells the whole story in a nutshell.

But why is it that way.. I mean, so far, the Government has given out 350 or so Billion dollars to bail out banks and investment houses and an insurance giant. It appears to me that none of that has filtered down to the people yet.

Question.. how many of you folks feel as if it isn't just the lending issue. That it's also people not wanting to go into debt at this point due to the uncertain future out there.

Just a question.

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how many of you folks feel as if it isn't just the lending issue. That it's also people not wanting to go into debt at this point due to the uncertain future out there.

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well i think you are sorta right....

on the one hand we have banks looking out for there bottom line.....and we have consumers who are probably near maxed out on credit already....

so the banks aren't lending to those who can afford credit....and many can't afford to pay for the credit they already have...


lending issue....the TARP cash, helped banks balance sheets....nothing more....they didn't have any stipulations on lending....people are still defaulting....home prices are still going down....there is uncertainty...fear....


consumer credit....either maxed out....or mortgages reseting...or loss of employment....take your pick....

Well, I know that in my case, I have a desire to buy a new car for myself.. nothing fancy,, perhaps on the lines of a new Chevy Malibu or something,

But given the business climate, I'm holding off. Just to let things settle down a bit.. see where I am.

Fortunately, I'm not looking for credit currently. I would love to buy a nice piece of hunting property, but I don't think I'd make that jump just yet.

One thing I have noticed a bit more lately is reservation cancellations. And not just the short date cancels which are normal. But long term reservations from guests that generally plan a year out or more. I've gotten 3 or 4 of them since I've been back from Vacation because folks are losing their jobs. And not Auto workers, 2 of them were in healthcare and one was a textile salesman who is a very good customer and has always presented himself well to do.

Tell me about it,, Yesterday, I laid off 4 people. not because they didn't do a good job. in fact, all did a great job. But the work load from that particular customer has dropped... and I think there is more to come.

SO all in all, I get the feeling that 2009 is a "hang on for dear life" kinda year.

Yup...I think I'm going to have to start taking shifts away from my employees soon to save a few bucks. Payroll is one of my only places to cut expenses. I don't want to cut them for many reasons, but I'm afraid I'm not going to have a choice. I also have to give one a minimum wage increase next week (thanks, Ohio), which doesn't add up to much, but when I'm working within the tens of dollar range, not the hundreds or thousands, every little bit matters.

Sucks doesn't it... having to tell someone that they are laid off the week before Christmas isn't easy either....

these bailouts are the worst thing in the history of our country

Thouygh most are only worried about their 401k or their house loan and don't see the bigger picture

people like myself with a strong background in economics and a strong understanding of monetary policy are actually weeping behind closed doors

most simply don't understand how these things work, these bailouts have dug us all our own graves....

I would be happy to educate anyone on how this works if they wish to truely know...I find most can't handle reality and are content living in the dream world our coporate controled media and tv creates for them....

I will do Archbold