House Passes $14 Billion Bailout, But Detroit Three are not in the Clear Yet

Tom Ludwick

Despite major Republican opposition, the $14 billion bill to provide aid to the U.S. automakers passed yesterday in the House of Representatives. That figure is a billion dollars less than the figure discussed earlier in the week. With vast Democratic support it passed by a count of 237 to 170.

The bill has changed slightly since last reported. If passed, there will be strict oversight of the companies, and no further dividends would be paid while the loans are outstanding. There would be limits on executive pay and although most of the automakers have already emptied their corporate hangar, there would be no more corporate aircraft.

To oversee the automakers' operations, the president appointed "car czar" would be monitoring the cost-cutting progress. If the companies' efforts are found not satisfactory, the loans can be withdrawn within 30 days.

The measure is primarily a stopgap to keep the companies afloat until the new Congress and incoming administration of President-elect Barack Obama can reevaluate the situation. In the meantime, the companies will have time to work with creditors and UAW for additional concessions.

There is more trouble ahead with the now impending Senate vote. Many Republican Senators have vowed to not allow the bill to pass. We will now have to wait and see if the bill can receive enough Republican votes to cross the threshold into passing. A resolution is unlikely to happen within the week.


Here are some interesting comments from a former GM engineer who was laid off. it offers a peek into the inner workings of GM and why they are having such troubles:"In the time that I was at GM, all I ever heard was work harder and things will turn around. I, as well as a lot of other people (non management white collar), busted our tails in doing so only to see our medical insurance go up, our profit sharing reduced or disappear, cost of living adjustments taken away and raises disappear while the executives and UAW's (the UAW was never asked to sacrifice nor would they) did not."Quality of the vehicles is not the issue here. We designed and engineered vehicles to be of the highest quality. However, sacrificing on the part of the executives and the UAW as we had, to get back market share by lowering the price of the vehicles, was out of the question as far as they were concerned. If they had, these companies would have been in line with their competitors in what they pay their workers and executives and could have beaten them in the market place. These two entities refused to do so and now they have to ask for help because of it."[url=]The rest of the comments can be read here[/url]
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Ah P_F, I'm not as confident as you just yet. But I definitely agree that it has to be done at this point. My only hope is that they are able to make the hard decisions when needed and do what they can to be competitive. Otherwise, it could be 6 months and they need another bailout, etc. etc.When I was growing up my parents would only buy domestic cars (Oldsmobile, Cadillac) for years but when it was my turn to buy, none of the domestics appealed to me unless I was looking at a SUV. Worse yet, when I got a rental, the POS rental cars were generally Malibus, Taurases (sp?), etc. and that turned me off that much more. I will say though that it looked like we were starting to get it before the downturn - the Cadillac CTS was the first car in a while (in terms of what I was looking for) that really made me start considering domestics again...hopefully between the proverbial light turning on and this short term bailout, we can see a revival that we're all hoping for.
I think most people don't understand how essential these LOANS are to the survival of our economy. I'm also confident that the automakers will be able to repay the loans as promised as long as the banks allow regular folks to get new car loans. There really are a lot of good domestic products in the showrooms and even more good things coming very soon.
I definitely don't like the bailout but at this point, I can't see how we wouldn't do it. Especially with the latest unemployment reports, the only thing the demise of the big 3 will do is lead to more lost jobs which will just exasperate the economic situation. We give them the short term loans and see what happens in 6 months. By then hopefully any economic stimulus packages will have been passed and if the big 3 haven't gotten their act together, the risk of their bankruptcy won't be as bad - although it will still hurt..

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