Gee, Barack Obama was lucky to win the US presidency wasn’t he?
He’s had to sort out the botched bank bailout package from the Bush administration; argue over a real stimulus package for the whole economy and get it through Congress; and put together a help package for stricken Americans facing losing their homes, which we will see tonight.
And now he’s had to deal with the full-on begging bowl from the crippled giants of American car manufacturing, General Motors and Chrysler, which want an extra $US21 billion and more in state aid between them. That’s on top of the handouts from late last year of more than $US16 billion. In total, close to $US38 billion.
Ford remains on the sidelines, claiming it has enough cash to survive after mortgaging all its US assets in 2007 for a pile of cash which it is chewing through. Will it survive if the US car sector further shrinks this year? Or will it get out its begging bowl and hybrid it to Washington?
I suppose the best that can be said about the latest combined claims (and the two extra amounts demanded) is that they are cheaper than bailing out Citigroup or Bank of America, which between them have swallowed the best part of $US85 billion in Government cash injections; plus close to half a trillion dollars in asset guarantees.
All these headaches for Obama are a consequence of failed policies from past Governments (including the Democrat-controlled Congress), business, especially Wall Street and the car companies who actively opposed any attempt to make cars more efficient and greener until too late. And that includes the United Auto Workers Union, which did deals over the years with fat cat company managements that benefitted everyone, bar car buyers and now US taxpayers.
The union has been just as resistant as the company managements to making cars greener and have actively sought to transfer Government aid from taxpayers through the companies to its members by resisting cuts to pensions, health and pay benefits.
Now buyers have rejected US cars (all cars in fact) by slashing their purchases, firstly when operating costs got too high in 2008, then as they lost their jobs and credit in the closing months of the year and in January.
GM has already levered $US13.4 billion from the Government in the dying days of the Bush Administration, now it says it needs another $US16.6 billion to finance its restructuring that will see another 47,000 people sacked and the closures of five more American factories.
Chrysler, which has already snaffled $US4 billion from the Government, now wants an extra $US5 billion in loans to enable it to survive. It is also talking to Fiat about an alliance, with the Italian giant (also said to be looking for cash from investors in Italy), taking a 35% stake. Will it benefit from the US loans? It’s already causing a stink in the US Congress.
But on Tuesday, the company said that due to the “unprecedented economic decline” and lower sales forecasts, it now needs a total of $9 billion in loans in order to avoid bankruptcy.
Chrysler said it plans to cut about 3,000 jobs, or 6% of its workforce, and reduce its manufacturing capacity by another 100,000 vehicles this year as it tries to adjust to reduced demand. It also said it has won the concessions from the United Auto Workers Union and creditors that were demanded under terms of the loan from the Treasury Department.
But that doesn’t sound outrageous enough: at $US5 billion, the sum is too small and allowing Chrysler to fail becomes a distinct option.
GM said its:
need for government support was driven by the global financial market crisis, dramatically weaker economy and the resulting precipitous decline in vehicle demand. These conditions have impacted the entire auto industry, which in the US is down approximately 40% from its peak in 2005, to the lowest per capita sales rate in 50 years … Following the steep decline in U.S. industry sales in December 2008 and January 2009, GM responded by further lowering its forecast for 2009 US industry sales to 10.5 million units (57.5 million units globally) for viability planning purposes. These industry planning volumes are more conservative than those being used by most other industry sources.
Well, Chrysler now reckons that US car sales will fall to 10.1 million vehicles this year, the lowest level in four decades. If that’s the case, GM had better do some more cutting.
GM claimed that “with the restructuring, GM expects to start repaying the government in 2012 and fully pay off the loans by 2017.”
That’s three presidents away. GM is in effect asking to remain on the public teat for the next 8 years. Only in the home of free enterprise!