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Big Three Bailout: The Votes Aren't There

Big Three Bailout: The Votes Aren't There

By Marty Padgett's avatar Marty PadgettMarty Padgett December 4th, 2008

White House Detroit meeting

White House Detroit meeting

Enlarge Photo
The heads of Detroit's automakers are in Washington, D.C., today with a revised--and more PR-friendly--appeal for desperately needed loans, but the Senate's majority leader says the votes aren't there.

The AP reports Sen. Harry Reid (D.-Nev.) as saying, "I just don't think we have the votes to do that now."

The Big Three automakers and their leaders--Ford's Alan Mulally, GM's Rick Wagoner, and Chrysler's Bob Nardelli--caravaned to the nation's capital seeking a bailout package worth $34 billion, up from the initial $25 billion proposed a few weeks ago when the executives arrived in D.C. famously on corporate jets. This time around, GM and Chrysler are warning they could be insolvent in a matter of weeks--and to underscore their commitment to rapid change, arrived in Washington in their most fuel-efficient vehicles.

The Congressional deadlock on loans for the automakers is caught up in no small amount of politicking. Treasury Secretary Hank Paulson doesn't want automakers rolled into the $700 billion bailout fund he presides over; senators like Alabama's Richard Shelby are avowed against any Detroit bailout, more than likely because their constituents have nothing to lose (Alabama is home to transplant factories for Mercedes, Honda, Hyundai, and Toyota). If nothing passes from Congress before the holidays, it will be up to President Bush to approve a major financial package, although the Treasury has the authority to loan the automakers money.

GM says it needs $4 billion immediately, and Chrysler $7 billion, to stay in business until the end of the month. White House Detroit meetingEnlarge PhotoThe heads of Detroit's automakers are in Washington, D.C., today with a revised--and more PR-friendly--appeal for desperately needed loans, but the Senate's majority leader says the votes aren't there. The AP reports Sen. Harry Reid (D.-Nev.) as saying, "I just don't think we have the votes to do that now." The Big Three automakers and their leaders--Ford's Alan Mulally, GM's Rick Wagoner, and Chrysler's Bob Nardelli--caravaned to the nation's capital seeking a bailout package worth $34 billion, up from the initial $25 billion proposed a few weeks ago when the executives arrived in D.C. famously on corporate jets. This time around, GM and Chrysler are warning they could be insolvent in a matter of weeks--and to underscore their commitment to rapid change, arrived in Washington in their most fuel-efficient vehicles. The Congressional deadlock on loans for the automakers is caught up in no small amount of politicking. Treasury Secretary Hank Paulson doesn't want automakers rolled into the $700 billion bailout fund he presides over; senators like Alabama's Richard Shelby are avowed against any Detroit bailout, more than likely because their constituents have nothing to lose (Alabama is home to transplant factories for Mercedes, Honda, Hyundai, and Toyota). If nothing passes from Congress before the holidays, it will be up to President Bush to approve a major financial package, although the Treasury has the authority to loan the automakers money. GM says it needs $4 billion immediately, and Chrysler $7 billion, to stay in business until the end of the month.

Tags: Politics, General Motors

Posted in: 2008, Chrysler, Ford



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Responses (12 total)

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  1. By Jon R. #1, Posted: 12/4/2008

    I hope these senators are not depending on UAW member votes in the midterm elections! Given that AIG was given the keys to the city; it seems like somebody out to help a company that actually produces a product! I have a few bones to pick with GM and Ford but I rather buy their cars and keep the cash in the US than send it with all the other cash leaving for Japan.

  2. By Ed #2, Posted: 12/4/2008

    Jon:
    Buying the ford fusion made in MEXICO and not the far superior Honda Accord made in OHIO (at., trust me, a huge expense to you and yoru family, if you calculate the TOTAL cost of ownership), makes NO Sense.
    AIG and the banks bailout was a NECESSARY EVIL, necause banks lend to ALL industries, and if banks die, the whole SYSTEM goes to hell. We hate their guts, but had to help them.
    back to manufacturing, why LIMIT it to cars? Do you really think you are fair and consistent when you support the idlers that cost GM and Ford $73 an HOUR (incl benefits, and that is an accurate, outgageous as it may be, number), and EVERYTHING ELSE in your household is made in CHINA and bangladesh? And all your clothes, from your hat down to your sneakers?

  3. By jerseyGEoff #3, Posted: 12/4/2008

    Not bailing out Detroit is wrong- I shudder to think how much collateral damage will occur, not just to Midwesterners but the whole country. That said, we need to push the button for healthcare- and simultaneously solve Detroit's biggest cost problem--
    A Much 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 retirees’ 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 for SUVs and light trucks, 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 retirees’ healthcare. It would be far better for Congress 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. 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.

  4. By JKD #4, Posted: 12/4/2008

    We can't afford national healthcare. The Iraqis and their cheap oil come first!

  5. By Max #5, Posted: 12/4/2008

    Actually the UAW workers are getting about $28-38 per hour with benefits. New hires start at $14. The huge problem is the legacy costs for retirees that bring it to the $70 range. Obviously that is a problem but one even Honda will face in the next 10 years or so when their work force starts entering retirement age. Sure UAW has been a part of the problem but we all need to remember that the European and Japanese cars built at the home factories are union built and they are (at least were) profitable. The difference is good management, good design and good product.
    Of the big 3 Ford is closest to getting it. Their quality is right up there with Toyota and Honda, although their products may not yet be as appealing as the imports. So it is possible for them to compete.
    We gave CITI Corp over 300 billion dollars with no strings attached, how can we rationalize not loaning 10% of that at least to GM and Ford (Chrysler is history) and maybe force them to get new management.

  6. By Dave #6, Posted: 12/4/2008

    I am for helping the big 3. Why not give them a bail out but also give people that buy cars from the big 3 a tax break of some sort. That would spur people into buying cars, helping the suppliers and also helping dealers thus helping the economy. The UAW should also stop this stupid job bank. Max I agree with you, why did we give CITI corp 300 billion dollars, i think I am correct that CITI is partialy owned by a Saudi Shiek! Total madness! I also agree chrysler will prob get gobbled up by GM or Nissan.

  7. By  Marty Padgett #7, Posted: 12/4/2008

    JerseyGeoff is clearly some sort of ad-hoc lobbyist. Every time he posts about the Conyers-Kucinich socialized medicine bill I want to pop a Viagra.

  8. By R2dad #8, Posted: 12/4/2008

    I have not seen HR 676, but the whole problem with UAW healthcare is that there is no incentive to stop consuming health care resources. No co-pay, no deductibles sounds unreasonable. What's wrong with a $10-$20 co-pay, like the rest of the US? On the west coast, where the majority of our manufacturing jobs have been outsourced 7-20 years ago, there is little sympathy for these detroit dinosaurs and their oblivious CEOs. Chrysler will be lucky to get uncle sam to buy that company for $1 if taxpayers assume the liabilities. No one will buy it; nationalizing it is folly; combining it with GM is concentrating risk in one entity--all bad ideas. Close the doors and auction off the few remaining assets of value (jeep, viper?). I guarantee that GM will view this bailout a little differently if Chrysler, which is by far the weakest of the three, is allowed to fail this month--two weeks too soon for Obama and Nancy to intervene.

  9. By JKD #9, Posted: 12/5/2008

    Dave - That Saudi prince owns less than 5% of Citi and, trust me, he's lost billions on this "investment". Our prez has been owned by the Saudis 100% for the past 8 years if you want to talk about madness. They own 10% (if not more now) of our debt too and, oh, one little detail, they were actually behind 9/11 and Bin Laden family members (about 100 of them) were the only ones allowed to fly out of this country right after... Why not give the $$ to the 2.5? Because $35 billion is a lot of money to burn through in three months that it will take them to come back to ask for more.

  10. By jersey GEoff #10, Posted: 12/5/2008

    to marty- sorry but I think I see the problems of industry in this country better than you-28 years in international big business leads me to conclude that americans work as hard, manage as smartly generally as Europeans and Asians. What's different is our healthcare which penalizes manufacturers while providing less care for more bucks. we need to closely look at all costs that the automakers have- and to r2dad, fine put a copay in but let's not end up with an hmo style gatekeeping machine that prevents folks from getting efficient care when they need it. My 'put them under medicare' scheme solves the legacy cost problems that add $2000 bucks to every GM car- get on board or come up with something else because Congress may just flush the midwest down the hopper if we are not careful..

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