Obama Presses President Bush About Automaker Relief
By Michelle Krebs November 11, 2008By Bill Visnic
The Associated Press reports today that President-elect Barack Obama, meeting yesterday with President George W. Bush, "suggested" Detroit's reeling automakers need financial assistance -- and need it now. Obama appears to believe keeping the domestic automakers afloat is vital to keeping the nation's flagging economic engine firing -- but he does not become president until January.
It appears Detroit's automakers can scarcely afford to wait.
After a serious bad-mouthing (and resultant downgrading) of General Motors Corp. stock yesterday by Deutsche Bank, GM's stock price plunged, and in early-morning trading on Tuesday was well under $3 per share -- a World War II price. Deutsche said in a scathing analysis of GM's situation that the automaker may be in danger of being unable to meet its operational funding obligations beyond the end of the year without some type of federal intervention and said GM stock is effectively worthless.
Although Ford Motor Co. is in better financial standing, its stock has been dragged down under the $2-per-share mark, and many believe privately held Chrysler LLC is effectively running on empty. Chrysler is paring and restructuring its model lineup in response to dangerously sagging sales, and Detroit sources say the company had deeply slashed spending on all product development.
Another elephant happens to be lurking in the automakers' garages: funding for the United Autoworkers Union health-care benefits fund -- the Voluntary Employee Beneficiary Association -- a deal struck during last year's labor negotiations designed to eventually free the automakers from perpetual funding of retiree health care. GM, for example, is locked into a $7-billion payment into the VEBA in 2010.
Congress has earmarked $25 billion in loans for automakers, but that money is to be used to develop more fuel-efficient vehicles and components and for the retooling of factories to build them.
For more immediate help with day-to-day operations, automakers and certain Congressional officials are discussing expanding the conditions of the $700-billion banking-industry bailout to encompass direct financial assistance to Detroit's automakers. One trouble spot may be Chrysler's standing as a non-public company; Chrysler is 81.1 percent owned by Cerberus Capital Management LLC, with the remainder held by Daimler AG.
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It was announced today that Sectetary of the Treasury Henry Paulson has ruled out any relief coming from the $700bn TARP fund. It's now up to Congress to work out something. They had better. Fast.
Every one of the 435 representatives has constituents in their district whose incomes are directly or indirectly derived from the auto industry, including mine; probably yours.
I was initially against any sort of government bailout when all this mess was first revealed. But now I believe that this really is a crisis that could permanently lower our standard of living.
Merle Haggard sang it best, "If we make it through December, everything's gonna be alright, I know".
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