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Automakers ask for bailout to keep wheels turning

Posted Nov 07 2008, 12:17 PM by Minyanville
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The auto industry wants to back a truck up to the US Treasury and drive away with $50 billion.

General Motors, Ford and Chrysler say they need the money to get them through the worst auto market in about 25 years.

But the money wouldn't necessarily be used to develop the next generation of fuel-efficient or electric cars. Legacy costs are killing the US auto industry and the automakers say they need about $25 billion for healthcare costs. The balance would be used for general liquidity and could be delivered in different ways, including short-term borrowing from the Federal Reserve.

In return, the automakers would grant stock warrants, Bloomberg reports.

In September, Congress approved a $25 billion loan program to help the automakers build fuel efficient vehicles. Buyers are shunning gas-guzzlers in the economic downturn and Detroit was stuck with production geared to SUVs and pickup trucks.

The 3 automakers reported combined first-half losses of $28.6 billion. In October, new vehicles sold at a seasonally adjusted annual rate of 10.6 million, the lowest since 1983.

The argument for the bailout is familiar: It'll saving jobs and a good chunk of the nation's manufacturing industry. It's hard to imagine Congress refusing, especially now that Democrats have extended their majorities in both houses.

Previously, Congress approved a $700 billion package for the financial industry. It seems to be working well, even if some executives at American International Group spend some of the money on fancy trips.

The United Autoworkers Union says it supports the $25 billion for its members' healthcare costs. The automakers continue to struggle to support UAW-run trusts that were set up to cover retirees' medical care.

On Thursday, GM CEO Rick Wagoner, Ford top dog Alan Mulally, Chrysler's Robert Nardelli and UAW President Ronald Gettelfinger met with elected officials to push the deal.

Speaker of the House Nancy Pelosi, D-California, says the government wants to ensure the "viability" of the auto industry while "looking out for taxpayers."

President-elect Barack Obama says he plans to work with the auto industry to make it more competitive. Obama has said the nation needs a $175 billion stimulus package to follow the $168 billion package President Bush signed into law in February.

Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Contributor Scott Reeves.

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Comments

 

HEY, TROY CLARKE (GM CEO), IF YOU CANNOT MAKE IT, QUIT YOUR JOB!!! That's what capitalism is about! Didn't you learn that in school or from your daddy? Really tired of baling out incompetent CEOs.

GM shares are an excellent candidate for short selling because they will go down in the short term with or without a bailout. There is also a very strong possibility that GM will become bankrupt. More info on short selling stocks at http://www.ShortSellingStocks.com

bailout of Automakers will be a big mistake because they were warned many years ago to make better energy efficient cars and the refused to do so.  I don't agree with the bailout of banks, but at least that may help the economy in the future.  I think that the people of those automakers should take job concessions such as:  Less pay, contribute into the health care, less time off etc.....  These automakers have been prospering for years which allowed their employees to prosper.  Now that they are hurting, it is time for the employees to step up to the plate and help their employer or lose their job for good.

Well it seems that the horse has gotten behind the cart somehow,,, the UAW has it better than 75 % of the working class, ,,, so let's start there and start cuting the fat, and do away with the golden parachutes and lear jets, and hell you could just go on and on,, how bout lets trim about 50 billion off the pork fat with the auto makers like Japan has and then step back and start making sensible cuts,, and all will come together, neatly,,, and with no loss, oh,, except the lears and the $700,000 trips to the weekend spa's ,,,,,dam I hate it when that happens,!!!!!!!!!!!!!!

Don't short sell American auto makers. The governemnt will be assisting this industry so that it can operate in these tough economic times. It bailed out the banks and it will bail out the automobile industry. The auto industry is the backbone of our economy and with out an auto industry we might as well be subsistence farmers. www.youtube.com/watch

"QUOTE" automakers say they need about $25 billion for healthcare costs.

the employees of this endustry have lived well on 30.00 plus dollars an hour for a long time let them pay their own medical expenses for awhile maybe they wont be so quick to go on strike the next time their contract is up. why should the rest of the tax payers pay for their greed and selfishness

I am retired, but not autoworker. I have to buy my own medicare supplement. Why should I pay (taxes) for retired autoworkers healthcare?

I read a great deal of posts on various blogs covering various topics.  Ignorance prevails in America.  If the auto makers go bankrupt, so does most of ignorant America.  From the tire manufacturers, to your local parts suppliers, to the small manufacturing shop in your backyards that make lugnuts and the like. Job loss would be in the millions! So keep talking ignorant America. The ignorant naysayers on this blog will fall right along with the auto industry if there is no bailout.  You just might get what you're asking them to get.............BANKRUPT!

A.T.I.: You like socialism and government taking stakes in PRIVATE companies, don't you? Since when are the bailouts a backbone of capitalism in the U.S.? You really want Uncle Sam to own a piece of you? Then PUT YOUR own damn money on the line for GM, Ford, banks, and insurance companies, etc. and wire transfer it to them!!! NOW!!

I loathe socialism and government.  Watch the Zeitgeist movies I and II Robbie.  Then talk to me about capitalism.  Capitalism is one of the greatest government frauds of our history.  The Federal Reserve Bank was created to keep America in debt, hence control the population.  Unfortunately, you are one of the populis.  So, unless you are one of those scumbags that left the fall of the economy with mega millions of dollars, you will go down along with the big 3, like or not.

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