GOVERNMENT LOANS FOR AUTOMAKERS

[Oracle of Delphi]

September 12, 2008 - 12:01 am ET

UPDATED: 9/12/08 1:31 p.m. EDT

WASHINGTON (Reuters) -- The U.S. government should not back $25 billion or more in loans to help General Motors and the other domestic auto companies, the top Republican on the Senate Banking Committee said on Friday.

"I would say no to them," Richard Shelby of Alabama said as Democratic leaders of the House of Representatives and Senate seek to push through a measure in the coming weeks that is necessary to put the credit program in motion.

"I don't see this as a national problem," Shelby said in an interview on CNBC television. "I see this as their problem."

He also noted the government -- which has spent billions to prevent the collapse of investment bank Bear Stearns in March and mortgage giants Fannie Mae and Freddie Mac this week -- needs to move away from the notion that major institutions are too big to fail.

Among U.S. lawmakers, Shelby's comments were the sharpest yet that automakers do not deserve help -- that huge financial losses on the sharp decline in domestic market share and sales are largely a problem of their own making.

"They've seen this coming for a long time," Shelby said.

The loan program is open to all auto companies, but was designed primarily to help sagging U.S.-based manufacturers retool factories and develop new technologies necessary for meeting a government mandate to improve the fuel-efficiency of their vehicles by 40 percent by 2020.

Detroit is pitching the assistance as a way for automakers to better help reduce America's dependence on imported oil.

RISE IN GM, FORD SHARES

Lehman Brothers analyst Brian Johnson said in a note to clients that GM stood to benefit the most from the program, potentially meeting half of its cash needs through 2009, or about $3.7 billion out of $7.3 billion.

Ford could raise about $2.2 billion through the program, but does not require external financing, he said.

Shares of GM and Ford rose again on Friday as analysts said they believed carmakers are more likely than not to obtain at least some of the $25 billion package.

U.S. House Speaker Nancy Pelosi said on Thursday that Democratic leaders would like to see Congress act within the coming weeks to activate the loan program. Energy Department regulators have begun drafting criteria for how the loan program would work and who would qualify.

Pelosi said she was looking to include a provision for the auto companies in a spending bill or other must-pass legislation likely to be signed by President George W. Bush.

The current thinking among Democratic leaders is to propose funding for $25 billion in loans that could be tapped as early as 2009. Automakers have said they would like the package to go as high as $50 billion, a legislative challenge some insiders say may not be practical with the compressed congressional calendar.

The White House has been skeptical of direct financial help for auto companies, saying on a number of occasions that it does not want the loan program to be used as a bailout.

"Obviously we want to be very, very careful about the government's role with private enterprise," White House spokesman Tony Fratto said. "There are lots of industries that are dealing with challenging economic conditions, and it's always important to be very cautious about the federal government's role."

Link: http://www.autonews.com/article/20080912/A...paign_id=alerts

[Robert Hall]

Odd..I thought the Republicans were 'Country First'. I guess not all of them.

This is similar to Chrysler's loan guarantee deal in the early '80s, isn't it? The auto industry represents a nationally significant industry that shouldn't be allowed to go under, IMHO.

[Oracle of Delphi]

Odd..I thought the Republicans were 'Country First'. I guess not all of them.

This is similar to Chrysler's loan guarantee deal in the early '80s, isn't it? The auto industry represents a nationally significant industry that shouldn't be allowed to go under, IMHO.

Here's the question, how many foreign auto plants are in Alabama? Hmmmmm?

[Drew Dowdell]

What ever happened to republicans giving money to the rich and to the capitalists?

[Robert Hall]

What ever happened to republicans giving money to the rich and to the capitalists?

Well, they only give money to those give them money..it goes both ways..either through campaign contributions or kickbacks...

[Robert Hall]

Here's the question, how many foreign auto plants are in Alabama? Hmmmmm?

Yep..no Detroit plants, and an M-B plant there (and also Hyundai?).

[loki]

Yep..no Detroit plants, and an M-B plant there (and also Hyundai?).

maybe that's why MB quality isn't as great as the name implies. hehe

i think this is just what has become a circle for dems. pass legislation that hurts the companies we have, then we have to give them loans, and then more legislation, then more hurt, thus more loans or less industry.. power corrupts, few can withstand it.

[loki]

poking some fun, but couldn't this be horse and sparrow with more than just economy. so much extra oats it's a self seeding process....with fertilizer for free!!!!! lol

loans that should produce better cars, less oil use, better for the environment... the money will hit research, produce "breakthroughs" that will either be patented or outsourced and supposedly the consumer will "profit".

I think this will come back to haunt us if over time things don't change. the bill at the end of the "period" will cut into profits and could be the hair that broke it's back.

[FUTURE_OF_GM]

"I don't see this as a national problem," Shelby said in an interview on CNBC television. "I see this as their problem."

I guess hundreds of thousands of unemployed auto workers isn't a national problem? I hope the UAW remembers what this man is saying about them on behalf of the Republicans.

Among U.S. lawmakers, Shelby's comments were the sharpest yet that automakers do not deserve help -- that huge financial losses on the sharp decline in domestic market share and sales are largely a problem of their own making.

Yes and no.

"They've seen this coming for a long time," Shelby said.

Sure... But what they didn't see coming is how your comrade in Congress and that joke for a leader Bush were going to screw them over on both gas prices (By market deregulation) and an impossible energy policy.

Detroit is pitching the assistance as a way for automakers to better help reduce America's dependence on imported oil.

True that... If you guys want to go with the whole green then you'd better be prepared to pay for it.

Shares of GM and Ford rose again on Friday as analysts said they believed carmakers are more likely than not to obtain at least some of the $25 billion package.

This makes me wonder if concessions weren't a part of the CAFE deal to begin with, since the big three didn't really fight it that much in the first place. This is basically (well deserved) free money to get them through 'the pinch' until the legacy costs and economy come under control. The products have already been bankrolled for the most part.

"Obviously we want to be very, very careful about the government's role with private enterprise,"

When has that ever stopped you before?!?! That statement should really read: "We don't want to piss off the Toyota f*cking, green humper, import loving voters that carry the most influence in this country"

[FUTURE_OF_GM]

maybe that's why MB quality isn't as great as the name implies. hehe

i think this is just what has become a circle for dems. pass legislation that hurts the companies we have, then we have to give them loans, and then more legislation, then more hurt, thus more loans or less industry.. power corrupts, few can withstand it.

It's called "bleeding heart leadership"

Support everyone, then support that which supports everyone so you can once again support everyone.

[Drew Dowdell]

poking some fun, but couldn't this be horse and sparrow with more than just economy. so much extra oats it's a self seeding process....with fertilizer for free!!!!! lol

loans that should produce better cars, less oil use, better for the environment... the money will hit research, produce "breakthroughs" that will either be patented or outsourced and supposedly the consumer will "profit".

I think this will come back to haunt us if over time things don't change. the bill at the end of the "period" will cut into profits and could be the hair that broke it's back.

This is only sort of horse and sparrow theory because they would be federally guaranteed loans not direct bail outs, but I see where you're going.

I don't know the specifics around the financials, but as long as the companies will be directly paying the loan back (ala Chrysler in the 1980s), I see no problem with it.

edit: In fact, I'd go so far as to put a "foreign competition tariff" on the imports to help subsidize the loan, but the globalists would string me from the nearest tree.

[Satty]

How about a Carbon tariff? Tax items produced in countries that pollute heavily. It could be fun.

[thegriffon]

No, a sales tax on everything, imported or not, to boost social security and provide 100% coverage for the pension benefit guarantee fund, medicaid and 100% tax rebates for medical insurance. That would cut costs dramatically for US producers, but not importers, and can't be called protectionist.

[GXT]

One good thing about this is hopefully we won't see any more rants by FOG (or anyone) about the Japanese government helping Toyota. Socialist USA apparently does so as well.

[FUTURE_OF_GM]

One good thing about this is hopefully we won't see any more rants by FOG (or anyone) about the Japanese government helping Toyota. Socialist USA apparently does so as well.

Nah...

Until Detroit is given a complete free ride and americans are FORCED to buy american cars, I can always find something to b*tch about.

Yes, I support communism, as long as I'm in charge.

Edited October 1, 2008 by FUTURE_OF_GM

[siegen]

One good thing about this is hopefully we won't see any more rants by FOG (or anyone) about the Japanese government helping Toyota. Socialist USA apparently does so as well.

The US government would have to help GM a LOT more to even start to be equivalent to Toyota. First of all, they would have to oppose competition from other domestic manufacturers. Then severely tighten import regulations, to keep imported cars to a trickle. Make GM the official auto manufacturer of the country. Then help fund or subsidize Volt R&D. Ok, maybe I'm exaggerating a little bit.

In soviet Russia, road forks you!

Edited October 1, 2008 by siegen

[SoCalCTS]

Seriously, Alabamans need to remove the sticks from their asses. They are the most anti-American state. They want to give the huge tanker deal to Airbus... they oppose helping the US auto industry cause it might hurt their foreign auto plants. This state has never been loyal since the end of the civil war. Its time for a smack down on these guys.

[CARBIZ]

How about a Carbon tariff? Tax items produced in countries that pollute heavily. It could be fun.

Now you're talking! Although GATT would probably have a fit, a carbon tax in imported goods (to 'offset' the carbon emissions of the freighter that shipped the finished product half way around the world) would go a long way to curbing imports from Asia. I understand that under the Kyoto Accord, shipping was exempt! I wonder how that passed!

If the ecoloonies who buy Priuses only understood the true environmental footprint of their precious car, assembled in Japan with parts and materials shipped from all over the world.