Wednesday, February 18, 2009

The Automakers Back at the Trough

Well, back in December the Big Three U.S. automakers -- mostly just GM and Chrysler -- told the Congress that they needed billions of dollars to be able to survive the current economic crisis, and the Congress didn't buy it. After much fierce debate, Republican Senators managed to defeat the bill to provide these struggling companies with billions of emergency aid without any real plan for becoming viable, profitable businesses. But never fear, our then-president George W. Bush stepped in and provided GM and Chrysler upwards of $15 billion in emergency funds out of the government's TARP package approved last fall. Right when it happened I mentioned here that all this really was, was Bush deciding that he did not want his legacy to include the bankruptcy of America's auto industry and whatever fallout that would entail, so he decided to blink in his showdown with Congress and just come up with enough money to hold these companies over until Bush was back home in Texas, until a day he knew with 100% certitude would come soon but when this would no longer be his problem to deal with.

Folks, that day is today.

On Tuesday evening, GM and Chrysler filed their restructuring plans with the Obama administration, as required by the conditions of the emergency loans provided to these companies by President Bush just two months ago. And guess what? All the money we gave GM and Chrysler back in mid-December -- $15.4 billion, mind you -- is now gone, burnt through in just a few months of run rate at two companies that are losing money billion by billion just running their business in this economy.

And guess what else? Apparently, things have worsened in the beleaguered auto industry just since the last round of free billions in December. I know -- shocker, huh? Now, Chrysler says it will need more than another $5 billion to survive, over 40% more than expected based on the December plans, and troubled GM has determined that it requires another $16 billion to make it! That was some use we got out of that $15 billion in December, huh? Things are so bad with GM, the nation's largest automaker, and it is so lost in terms of figuring out a way to be profitable, that CEO Rick Wagoner (somebody please tell me how the funk this guy is still in charge at GM?!) said the company would run out of money by March without $2 billion in new funds, and that it needs another $2.6 billion to fund April's operations. So we're supposed to just keep coming up with more than $3 billion a month for these companies to lose?

Is anybody really surprised by any of this? I mean, what's the end game here, guys? Someone makes a product that is universally adjudged to be inferior to those of its competitors, they lose $3 billion a month running a huge operation to manufacture and distribute these inferior goods, and the government is just supposed to keep paying for it? Why? Until when?

I just don't get it. It must be me.

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Blogger Astin said...

Automakers stopped being in the car business years ago. They became banks who financed car purchases.

Now they're scrambling to make cars again, but are terrified of declaring bankruptcy, which they clearly must.

1:14 AM  
Blogger DuggleBogey said...

Nissan was projected to make over $1B in profit last year. Instead they lost almost $3B.

How are their products "adjudged?"

6:21 AM  
Blogger on_thg said...

"a product that is universally adjudged to be inferior to those of its competitors".

I know this a rant and hyperbole but come on. The Big Two Point Five may not make the best vehicle in every class, but in many they still make a product that is generally superior, not inferior. Trucks, for one.

7:51 AM  
Blogger POKER PLAYER said...

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9:03 AM  

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