Government Set To Bail Out Major US Automakers
November 16, 2008
A plan is in the works by the Bush administration and the US Treasury to expand the scope of the $700 billion rescue plan to include US automakers. According the legislation that authorized the bailout, the top three American car companies are eligible for financial assistance.
The move is a bold one, and according to some analysts, it would put the Treasury in a new position as a speculator on whether businesses will succeed or fail in the markets, making choices in either regard. This would fundamentally change the original intent of the bailout plan as a means to free up the credit markets.
Of all the other companies that may already be in a position to benefit from the rescue plan, automakers are considered especially vulnerable to the spiking financial conditions. The financial organizations affiliated with carmakers tend to produce higher profits than the vehicles themselves. At the same time, the credit crisis has hit this aspect of business the hardest. Financing has slowed to almost a complete stop. Consumers, in turn, are left without the means to get loans to buy vehicles; even dealerships are having difficulty getting finances for inventory.
The percentages of sales for GM, Ford and Chrysler are have climbed to double digits. Additionally, the companies were forced to eliminate both jobs and employee benefits in order to salvage their businesses and maintain necessary capital.
There are even talks of a merger between GM and Chrysler in an attempt to save both companies from total financial ruin as cash reserves are disappearing at an alarming rate. Alternative plans include a partnership with Nissan and Renault.
While a $25 billion loan package was rushed through Congress in an effort to increase production of energy-efficient cars, the financial boost may not be implemented fast enough to be of use to the automakers.
In talks with Treasury and Energy department officials, the auto company execs have been urging for faster relief plans to minimize the losses. It is still unclear exactly what measures will be used the US Treasury to aid ailing automakers.
- UAW may give up jobs bank to revive auto loans The United Autoworker's Union (UAW) is currently involved in negotiations that would eliminate it controversial jobs bank. Furthermore, the UAW may be open to other concessions that will help
- Cash, Clunkers and October Auto Sales You are driving down the road and the clunker of a car actually begins to go “clunk”. It’s time for a new auto! Now you’re berating yourself that you
- Department Of Energy Establishes Auto Loan Rules Recently, the US Department of Energy announced a set of temporary regulations that would help it manage its $25 billion auto loan program. This plan would allow automakers and
- Cash for Clunkers Had Some Clunker Results A lot of taxpayer money has been thrown around recently in the automotive sector. The federal government is contemplating its third round of bailouts for an ailing auto industry. What
- U.S. Automakers’ Small-Car Output May Outstrip Demand Big automakers, GM, Ford, and Chrysler are taking advantage of government incentives to design and build more fuel-efficient models, and are prepared to increase small-car production capacity by 63% by