Seems in recent months just about everyone has had a bailout in the financial industry. Now it’s the auto guys that are asking the government for some loose change. $50 billion is loose change compared to the $52 trillion the United States government currently owes, which makes me wonder where they get their money from.
As the Democratic and Republicans gathered for their party meetings, the party buses were not bringing cheerleaders, but VIP’s and lobbyists from the automakers. North American automakers that is. Automakers that are struggling to retain market share, profitability and sales.
Sales are down 20% across the board between the Big Three for the past quarter, which in fact should be called the Declining Three, with sales numbers outpaced by Asian brands.
It is no easy task to maintain a company with unionized workers, retired workers and soaring supply costs. Transportation costs are up, so are health benefits and overhead utility expenses. All of the forementioned would not be a problem if sales would pick up.
Detroit is asking the feds for $50 billion in low interest loans to re-vamp the product assortment and meet fuel efficiency standards set out by CAFE. Asian competitors do not have to worry about such problems, as their balance sheets seems healthy, which guarantees them low interest loans from common lenders such as banks. The Big Three on the other hand does not have the luxury of having a clean balance sheet, therefore will need government backed loans in order to keep interest costs under control.
Thankfully, both Obama and McCain need votes in Michigan and Ohio, therefore both parties are behind the proposal to fund the automakers.
All eyes are on Congress to see if they can raise the required $50 billion.
