The auto industry continues to ask for a federal bailout but was refused once again by Congress. CEOs of major automobile companies ( General Motors, Ford Motor, and Chrysler LLC) were dealing with criticism from Spencer Bachus of Alabama, the committee’s ranking Republican before the companies even started their requests to the House Financial Services Committee. He stated that they don’t understand why people’s tax dollars should support “less efficient businesses”. He said most of the people he works will earn less money than the autoworkers whose jobs would be saved. However, Barney Frank (House Financial Services Chairman) believes that we shouldn’t take into account the pay of the autoworkers because there wasn’t discussion of the pay of the average worker at the financial firms that received government bailouts in October.
The industry is asking for $25 billion in loans to support them through the current downturn and is offering the government an equity stake in the companies if they get the help. General Motors announced Nov. 7 that it could run out of money that they need for operations by the end of this year or early next year if they don’t receive federal assistance. But Paul Kanjorski, D-Pa., said, "I am not yet convinced that we must act so rashly," he said. "The American public demands that we get this right."
Kanjorski asked GM CEO Rick Wagoner for the minimum amount of money necessary to keep GM afloat through March 30 to give Congress more time to work on a bailout package. He asked when they would run out of money. However, Wagoner wouldn't give more details more than the company's statement that it could be out of cash later this year or early next year. He said, "I don't believe we have the luxury of a lot of time," and when he was pressured for an exact deadline he responded that he can’t say for sure. Nardelli said Chrysler had looked at filing for bankruptcy. But he said even if the company decreased costs and contracts under bankruptcy, it would find suppliers demanding cash on the delivery of parts, which would cause an even greater crunch on cash.
2 comments:
I don't think the bailout plan is going to work out. If the auto companies got the money, they're still faced with strong competition from Japanese auto companies. In addition, it is not certain how long it will take for the economy to recover; and while it is still in this state, the demand for automobile is low so the hope that the auto companies will be able to recover after the bailout plan is very questionable.
I agree w/ Duy! Moreover, with the trickle down effects, more industries would be facing hardships. If the government decides to bail out the auto industry, what industry would be next? Then the question would be, how much capacity can the government have? How many industries it can help bailout? Then later one, how long does it take the government to privatize these companies? We know how hard it was to privatize companies in a right way during the transition economy, do we? :)
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