Auto Bailout Deal Reached

by: Chris Bowers

Fri Dec 05, 2008 at 22:19


Just reported now, so details are minimal. This gist of it appears to be a partial spending plan that will allow the automakers to stay afloat until late January, at which point Republicans won't matter for a while.

Democratic leaders and the White House reached a deal to provide billions of dollars in relief to the ailing U.S. auto industry, a senior congressional aide told Reuters on Friday.

The package, which Democratic leaders hope to win passage of next week and send to President George W. Bush, totals between $15 billion and $17 billion, the aide said, speaking on condition of anonymity.

The amount is far less than the $34 billion requested this week by General Motors, Ford Motor, and Chrysler, but Democratic leaders believe the money will keep them going until Barack Obama replaces Bush as president on January 20 and a new effort can be made for a rescue plan.

We should have done this with the bailout. Give a smaller amount, say $150 billion, and wait to do the real legislating once Bush is gone and Republican numbers have been dramatically thinned in both branches of Congress. It is pathetic and frustrating that we are still forced to deal with these lame ducks at all. The debate is no longer "how and when will Democrats cave to Republicans," but rather "are centrist Democrats going to go far enough?"

Chris Bowers :: Auto Bailout Deal Reached

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Auto Bailout Deal Reached | 52 comments
In the Times article (4.00 / 4)
this was a very disappointing passage,

LINK

By breaking that impasse, the lawmakers could also clear the way for the Treasury secretary, Henry M. Paulson Jr., to request the remaining $350 billion of the financial industry bailout fund.

Democrats are hoping Mr. Paulson will use some of that money to help individual homeowners avoid foreclosure.

1. I don't see how breaking this impasse should clear the way for Paulson to request the rest of the TARP funds. What is Paulson giving up here? It looks like he gets exactly what he wanted. No money for the auto-makers from TARP and all money coming from the energy funds. I though this guy was supposed to be a nature lover!

2. Democrats are hoping he'll use some money to help homeowners? I hope this is journalistic license and that they actually mean he'll be required to use some TARP money for homeowners as a condition to getting the rest of the money.

Yes and No (4.00 / 2)
On the one hand, I agree that this business with Paulson is horseshit.

On the other hand, a large part of me says, "We'll deal with that later.  At least they got the damned money to keep the automakers going through Inauguration."

[ Parent ]
I agree (4.00 / 3)
I just really really don't want Paulson getting another $350 billion to play with when we're now only 6 weeks from stronger majorities in Congress and Obama as president. In the hearings today and yesterday I noticed palpable frustration from most lawmakers of both parties (except the Hoover-ite republicans of course) at the utter farce Paulson has made of the TARP funds and the disparity between that and how Paulson and Bernanke have shat on the automakers.

I say at this point, Paulson and Bernanke have lied to us, so let the auto money go through, and then deny the TARP funds. The markets can handle six more weeks. It can't get much worse than it already is.

[ Parent ]
Why not (4.00 / 1)
pass at some point before Jan 20 something that hands over the 350 the moment after Bush leaves office so Obama can act right away.

John McCain: Beacuse lobbyists should have more power
[ Parent ]
I would be all for that (4.00 / 1)
but I'm a little murky on how the TARP bill was set up. Isn't it something where after Paulson requests it, congress has 15 days to deny it? That suggests to me that if no action is taken, he gets the money, right? Or do the funds actually require congress assenting to its disbursal?

[ Parent ]
Barney Frank (4.00 / 3)
TPM links an article saying that Barney Frank claims he will not be going along with any plan to open up the rest of the money unless "At the very least, he'd have to agree that some of that money was going to be used for foreclosure relief". So it depends on how much you believe in Barney Frank's ability to follow through on threats.

TPM's also linking this somewhat strange piece:

Treasury Department officials are laying the groundwork for seeking the second half of the $700 billion financial rescue package from Congress and have approached President-elect Barack Obama's transition team in an effort to gain access to the funds, sources familiar with the matter said.

With lawmakers on both sides of the aisle expressing heated opposition to such a request, Treasury officials have come to realize that they need the president-elect's help to obtain the rescue money, the sources said...

Obama has not yet stated whether the Treasury should receive the rest of the funds. But in agreeing to allow his aides to meet with administration officials and lawmakers on the issue, Obama appears to be demonstrating his willingness to engage on the issue, two of the sources said.

In a meeting with Treasury officials, Obama's transition team pressed them to use the second installment, if forthcoming, to help struggling homeowners.


The President has to go through the President-Elect to get anything done. Bizarre.
[ Parent ]
Thing is (4.00 / 1)
That $350 billion is frankly not that great of a total when compared to all the money that had been thrown at the banks et al. - so much money beyond this has been funneled into the markets one way or the other at this point beyond the "official" bailout that the $350 billion is not that "huge."
[ Parent ]
Which makes it all the more infuriating... (4.00 / 3)
that Paulson and Bernanke are playing Uncle Scrooge when it comes to lending 10% of that amount (lending! not even giving money!) to the automakers who you know, actually produce stuff, and provide stable employment to people.  
[ Parent ]
Agreed (0.00 / 0)
January 20 can't come soon enough.

I think this negotiation has made me realize the damage that Bush can still do.

BTW, can we dump Bernake? I don't think he's as bad as Paulson, but I'd like to see some fresh thinking at the Fed.

[ Parent ]
It would be nice wouldn't it (0.00 / 0)
to actually have a Democrat in that post for the first time since the mid 80's.  
[ Parent ]
No way (0.00 / 0)
No way congress passes the next 350 billion. I suspect with so much anti-bail  rhetoric out there (esp from hooverites) will be bipartisan votes against it even if dem leadership agrees to it. no one wants to vote for another bailout under bush unless they want their seats threatened in the next election.
[ Parent ]
Good (4.00 / 2)
this should be able to pass, hopefully at least and then once Obama gets in we can deal with it. Hopefully Obama's team starts negotiating with the autodealers to get them to accept a real visionary resurrecting plan that puts them on the path to fuel efficient cars even faster then Ford's plan and also hopefully makes them agree to stop lobbying to weaken every regulation of their industry. They'll go bankrupt unless they agree. They wouldn't really have a choice if the Obama team said unless you agree to this package we're not going to risk the political capital to rescue you.  

John McCain: Beacuse lobbyists should have more power
Yeah I think (4.00 / 2)
for the next 5-10 years at least, we've effectively nationalized the auto-industry.  
[ Parent ]
Mixed Feelings (4.00 / 2)
On the one hand I don't really want to see the US auto industry go under.  On the other hand I am not thrilled with using more taxpayer dollars to bailout industries that have mismanaged themselves close to bankruptcy.  

Overall, this is the right thing to do assuming GM (the company that really needs the $$) can reform itself.  The management at GM needs to go and they need to shed their overlapping brands.  

Ford seems to be moving in the right direction under Mulally, who interestingly does not come from the auto industry.

I don't see Chrysler making it alone.  Sad but true.

Other than "green" cars and increased CAFE standards, the other thing I really want to see is a reform of the dealer franchise contracts and laws.  The current process of going to a dealer, buying what they have on the lot or waiting months for a car and then having to haggle over price is archane.

I can order a computer online from a list of available options so why can't I do something similar for a car and then pick it up when it is ready.  It is time to change the current car purchasing system that does not fit 21st Century technology.  

Chrysler is gone... (4.00 / 1)
...they've already said they'd merge with GM as soon as it was feasable.  I hope they keep their minivan line going... they had the best.

It's ok... they were the smallest, and their best selling products were made in the U.S. and would continue to be so...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
GM isn't just some business... (4.00 / 6)
...I think that's what the "coastals" think... like it's Microsoft or Apple and if it went down, it would hurt the local communities a lot, but not cripple the west coast.

GM and it's suppliers ARE manufacturing in the US.  Period.  You take them out, you kill thousands of towns, tens of thousands of businesses, millions of jobs, and a complete infrastructure...

It's like farming disappearing from Iowa... It's a whole lot bigger than one company.

Unlike Microsoft or IBM... GM is a capital intensive company... the plants they run are massive... truly modern marvels, like mini wonders of he world if you've ever seen one in person.  These facilities aren't exactly places people reinvest in when they close... they go down, nothing ever comes to replace them... there's very few businesses that can or will...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
You are right ... (4.00 / 1)
Springsteen sang about this type of thing 25 years ago .. in My Hometown ... once the jobs go .. they never come back
[ Parent ]
Yep (4.00 / 2)
Need look no further than all the mid-sized towns/small cities in the midwest like Decatur and Danville, IL that have withered on the vine as the industrial capacity of this country has moved overseas.  
[ Parent ]
I have to give you props for invoking Springsteen. (4.00 / 2)
It also helps that you are exactly correct, but invoking a Springsteen song makes it that much more pleasing.
[ Parent ]
I am a huge Springsteen fan ....... (0.00 / 0)
have been to close to 50 shows(despite only becoming a fan around '92) ... I am around Bowers age .. so I know a lot of the ins and outs of Bruce like that   ;-)
[ Parent ]
Indeed. And Michael Moore showed the same tragedy... (4.00 / 1)
in "Roger and Me". Flint never really recoverd from the impact of the job losses.
[ Parent ]
I Never Said That (4.00 / 2)
GM was just some business.  I get they are huge and they have broad tenticles but they are the reason a federal bailout is needed.  Ford has already said they have enough cash to go a while and don't need the money right now.  

Unfortunately if GM goes down then it probably takes Ford with it which is why we are where we are.  It is the only reason I reluctantly support this bailout.  And my views have nothing to do with blue collar v white collar.  My general view is that it is not the job of the govt to bailout private entities.  I felt the same way on TARP but reluctantly supported it because these are extraordinary times.  I now wonder if that was the right position.

I know you are very passionate about this subject but it would be nice if you would acknowledge the bad decisions of the US auto industry like fighting CAFE standards, starving R&D on cars, putting huge emphasis on their financing arms, changing car names frequently, etc.  I really like cars and have followed the industry pretty closely over the years.  GM and Chrysler are not at the brink of going under solely b/c of the bad economy.  They have made a host of bad decisions over the years (GM in particular) that have gotten them here.  This NY Times has two good pieces on the problems of this US auto industry over the last 30 yrs in the auto industry.

http://topics.nytimes.com/top/...

http://www.nytimes.com/2008/12...

The US automakers have shown they can innovate when forced to.  The Ford Taurus and GM's redesign of the Cadillac brand have shown that.  I am betting this near death experience will force them to do it again but if they had been better run we wouldn't be here at all.

[ Parent ]
I wasn't accusing you per se... (4.00 / 1)
...I admit, it's hard to defend GM... maybe if they were run by a "car guy" rather than a "finance guy" we wouldn't be in this boat...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
Agreed on GM (4.00 / 2)
They have made mistake after mistake.  Ford, while up and down, has a much better track record although I fault them for letting the Taurus decline.  That was a great car.

Saturn is one GM missed opportunity that gets me.  It was a great idea and many of my friends bought Saturns as their first cars in the early-mid 1990s and loved them.  They could have been hooked for life but Saturn didn't offer a next level car to compete with Accord, Camry or the Taurus for when those people moved to the next stage in life.  So instead of buying the Saturn competitor to an Accord or Camry, my friends bought an Accord or Camry or Taurus.  A huge missed opportunity.

[ Parent ]
I completely agree with you on saturn. (4.00 / 3)
GM really screwed up on not capitalizing on Saturn's early sucess.  However, put some blame on people who continued to buy the gas hogs that are SUV's.  Maybe if more consumers would have demanded higher fuel efficient cars, GM would have put a higher priority on making them.  Not to blow my own horn, but I made the decision several years ago that gas wasn't going to get any cheaper.  Therefore, I traded my truck, which I loved, off to get something that got better mileage.  If more consumers had seen the light, it would have forced GM to change it's priorities that much sooner.
[ Parent ]
But we need to acknowledge (4.00 / 5)
the constraints we have put on the automakers too.
Lets face it. The lack of a rational health care system steered the industry towards larger models with their lower labor cost fractions.
[ Parent ]
7 Myths about the Detroit Auto Makers.. (0.00 / 0)
I am sick to death of people who know nothing about the industry repeating talking points and anecdotes like they were fact.  This is 2008 and not 1980.  

7 Myths about the Detroit Auto Makers..

They're asking for another four years -- in a just world, they'd get 10 to 20. ~~ Dennis Kucinich  

[ Parent ]
I Actually Know Quite A Bit About (4.00 / 1)
the auto industry.  I have followed it for years and I read that piece yesterday which I think is a very rosy picture of the industry.  Point blank - GM screwed the pooch.  

In the 1980s, when Ford built the ground breaking Taurus, GM launched the GM-10 project (Chevy Lumina) which was a disaster.  In the 1990s, when GM got it right with Saturn they let it die on the vine because they didn't build a Saturn step up car - a mid-sized competitor to the Accord, Camry and Taurus.  That meant the early 20 somethings who bought a Saturn instead of a Corolla or Civic could not move up the line in the Saturn brand.  Contrast that with Honda who brought the Civic to the US in 1973 and then the Accord in 1976.

Ford, for the most part, has done better which is why they are in much better shape than GM and Chrysler.  The Taurus and the Explorer were ground breaking vehicles.  The Focus is a decent car.  I do fault Ford for neglecting the Taurus in favor of SUVs but they clearly get it, especially under Mulally.

I don't deny that health benefits are a problem for the auto industry but so are the products they produce, especially GMs.  I support universal health care and that would no doubt help them.  However, I worked on the Clinton Health Reform effort and the big business, including the auto industry, opposed it.  They'd have been much better off if it had passed.

[ Parent ]
Name An Innovative and Successful Car From GM (4.00 / 1)
in the last 25 yrs.  Ford has the Taurus and Explorer.  Chrysler has the minivan and the cab forward design of the LH series.  GM has what?  The only commercially successful innovative GM vehicle I can come up with is Saturn which it neglected.  

The EV1 should have been seen as a concept car by GM and they should have allowed it to stay.  The company would have been way ahead of the curve if they had done so.  Instead, they are once again playing catch-up which is largely what they have done since Ford introduced the Mustang in 1964.  They have not been ahead on one market trend since that time which is kind of amazing for the worlds largest car maker.

I am focusing on the failures of GM because the bailout is really about them.  Ford could probably make it on its own if the supplier network could withstand a GM bankruptcy.  Unfortunately it can't .

The bailout is worth a shot because the consequences of not doing anything are worse.

[ Parent ]
I Forgot Cadillac (0.00 / 0)
GM has done a terrific job resurrecting Cadillac but they don't seem to be using it elsewhere, at least not yet.
[ Parent ]
Buick is doing pretty well in China (4.00 / 1)
http://en.wikipedia.org/wiki/B...

General Motors, selling vehicles under the Buick, Chevrolet, Opel, Saab and Cadillac names, is the best-selling foreign automaker in China. Selling a combined 876,000 vehicles in 2006, GM overtook Volkswagen the year before, although that company still holds the claim on best selling brand.[20][21] Making up nearly 35% of those sales, China is Buick's largest market, selling more there than even the United States.[22] In 2007, General Motors sold over 330,000 Buicks in China, more than twice what they sold in the United States.[23]

Which also suggests that there is some good in Free Trade.

[ Parent ]
I Read That (0.00 / 0)
and it surprised me b/c the designs of Buick cars are about the most boring things out there in my opinion.  I guess there is a silver lining somewhere.
[ Parent ]
Do you think that a "full bailout" negotiated under the Obama administration (0.00 / 0)
will be different in structure and effect than whatever bailout they were originally trying to hastily assemble for this month?
He had menitioned a month ago... (4.00 / 2)
...he wanted a 50-75 billion dollar fund overseen by an "auto czar" cabinet level appointee...

Ever since the private jets incident, though... he's been awfully quiet about his plans....

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
Remember the Trabant? (0.00 / 0)
Shitty cars stop being made at some point.
LOL!!! (4.00 / 2)
You forgot the Yugo and the Daihatsu.
[ Parent ]
The Yugo was still being made until this month... (0.00 / 0)
http://www.reuters.com/article...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
Wow (4.00 / 1)
That's frightening.  My friend owned one in school and we called it the disposable car.  What a piece of junk.
[ Parent ]
The what? (0.00 / 0)

[ Parent ]
The 26 horsepower wonder... (4.00 / 3)
...of East German engineering!

http://en.wikipedia.org/wiki/T...

Order one today, comrade... and drive, drive to freedom!!!

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
I consider myself fairly knowledgeable (0.00 / 0)
about cars.  I can honestly say I had never heard of this one.  After reading about it, I can forgive myself if I forgot about it.  Thanks for educating me.
[ Parent ]
Don't feel bad... (0.00 / 0)
...I only learned about it today, too! :-)

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
This is a bit off topic, but (3.00 / 4)
since you are still posting at this late hour, let me ask you a question.  What the hell is with all the 'dear leader' stuff here lately.  Am I missing something?  I get the fact that there are people out there who fit Sirota's description, but why keep hammering on it?  Seems like it is just an effort to stir shit up.  I respect your posts, you seem to be pretty reasonable and knowledgeable.  What's your take on all of this?
[ Parent ]
I don't know! (4.00 / 3)
I tend to ignore the "Obama's not left enough" posts 'cos I think it's ridiculous to be making judgements when he hasn't even assumed office, yet!

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
I find it interesting that the posts that generate the most comments (4.00 / 4)
are the 'dear leader' posts.  There were over 200 comments on David's post the other day.  The other thing that really gets me, is how Sirota responds to criticism.  I don't think that any of the FP'ers have responded to people as poorly as he has.  He ignores well reasoned critiques and tends to focus on the very negative responses.  Why not do the opposite.  Respond to those comments that have legitimate points and ignore those that are attacks.  Makes very little sense to me, especially when it happens over and over again.  
[ Parent ]
i am in the choir, and i'm listening to a fabulous sermon :-) (4.00 / 1)

[ Parent ]
I just looked .. (0.00 / 0)
and the Trabant was indeed part of the props ... U2 used around the time of Achtung Baby and the Zoo TV Tour
[ Parent ]
Sure (4.00 / 1)
After more than 30 years...

Mind you, as a piece of engineering on the cheap, it wasn't as bad as is generally suggested. It was just three decades out of data and very inefficiently produced.

Forgotten Countries - a foreign policy-focused blog

[ Parent ]
Michael Moore is right (4.00 / 2)
On the one hand, I want to punish the Big 3 for their terrible decisions. On the other, I don't want to see the millions of workers laid off who had no part in the root causes of the mess. The execs should be required to lay down their jobs as a price for saving the companies. Instead, they announced they are going to cut more factory jobs.

I wish, in 2010, we could find a way to make those congressman who ranted about $75/hour employees, starting with Richard Shelby. UAW workers did have pretty decent lives, but no one ever got rich working the line.

Re-Educate the workers (0.00 / 0)
It makes me nuts.  All the money to bail out loser companies could re-educate the entire flipping workforce plus send their dogs to obedience school and Grandma and Grandpa back to learning Powerpoint!

If people are worried about the people, then put the money into the people.

It's a sham solution (4.00 / 1)
That's been the mantra of all the free-trade and anti-manufacturing crowd for the last 20 years, "worker re-training". The problem is, the jobs most will be retrained for will only pay 30-60% of what they were making at GM or Ford. How would you like it if someone said to you, "don't worry, you can retrain for this other job and make half as much as before!".

Also, there comes a point where I'm sorry, but people should not have to completely start over in a career. If you're 57 years old and you still have a few years left until social security and medicare kick in, is it really productive for society to retrain that person to learn powerpoint? Maybe that situation could be worked out with early retirement plans or something like that. But in general, the idea of worker retraining, while useful in some contexts, is way to often seen as a panacea that fails to acknowledge that the vast majority of jobs that replace manufacturing jobs pay less, have fewer benefits, and are a bad deal for the workers.

If worker training is going to be the answer then we better get the card check bill passed, get universal health care, and get the minimum wage up to a living wage so that service sector jobs can actually provide wages that allow people to live their lives and raise a family.  

[ Parent ]
Not to mention .. (4.00 / 1)
If you're 57 years old and you still have a few years left until social security and medicare kick in, is it really productive for society to retrain that person to learn powerpoint?

How hard it will be for that 57 yr. old to find a job .. it will take a long time .. if ever

[ Parent ]
Auto Bailout Deal Reached | 52 comments





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