You think you have it hard: U.S. automakers have 3 months to make good on bailout money
Filed under: Borrowing, Budgets, Transportation, Recession, Bankruptcy
Under terms of a $17.4 billion bailout approved by President Bush on Friday, General Motors and Chrysler have three months to turn things around. If they don't, they have to repay the loans and face bankruptcy.
Does anyone really think that companies that are failing after years of bad business decisions will really get their act together by the end of March 2009? People have spent more time trying to stick to a diet.
The emergency loans start with $13.4 billion now and $4 billion more in February. The Obama administration will determine at the end of March if the automakers are meeting the conditions of the loans and will continue getting government aid, or if they must repay the loans and go bankrupt.
The loan conditions include sweeping reorganizations to show they can return to profitability. They must reduce debt by two-thirds, mostly through debt-for-equity swaps, and become competitive with foreign automakers by reaching an agreement with the United Automobile Workers union to cut wages and benefits. The automakers must also put limits on executive pay and get rid of their private corporate jets.
If they can't meet those loan terms, then the U.S. Treasury could call for immediate repayment, putting the government ahead of all other creditors.
I thought trimming my household budget was difficult. Cutting $13.4 billion in three months has to be one of the most difficult cost-cutting moves in history. With auto sales at their worst since the early 1980s and banks making it more difficult to get car loans, Chrysler and G.M. have their work cut out for them in trying to sell cars and lower costs.
Rick Wagoner, the chief executive of G.M., said at a news conference in Detroit, "We obviously have to deliver on our plan, but we'd like to get more focus back on what we think is a very competitive set of cars and trucks that are competitive in fuel economy and quality and in most cases have better designs," according to the New York Times.
Maybe somebody can start with the Pontiac Grand Am, a car my wife owned that gave us endless problems until we gave it away to a charity. We wanted a dependable car. What did we buy? A Mazda, made in Japan.
Aaron Crowe is an unemployed journalist in the San Francisco Bay Area. Read about his job hunt at www.talesofanunemployeddad.blogspot.com
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Reader Comments (Page 1 of 1)
12-19-2008 @ 10:02PM
Arnell Corson said...
What people don't know is the last contract negotion the unions gave up pay and benifits to help GM thrrough these rough times and I am sure they will give up more, but this is starting to look a lot more like union busting, than reoranization to me. They are going to hurt all the workers who have built the industry all these years and are now retired.
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12-20-2008 @ 9:36AM
Trisha said...
Actually I believe that the Big Oil Companies, should be bailing out the Automakers...They have alot in common and rely on eachother. The Fat Oil Companies have plenty of money to keep the Automakers afloat for years...With the Government Bail-out Programs, it's like we just keep paying in every direction(as Taxpayers) and have very little "say" on where the money goes. The Oil and Automakers had a secret handshake about 40yrs ago. Not to make cars that got great mileage..They had the technology way back when. So when they said to eachother, you scratch my back and I'll scratch yours..Now is the time for them to take care of eachother.
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12-20-2008 @ 12:20PM
JESSIE said...
WE HAVE MUCH TO MANY CARS ON THE ROAD ,HARDLY ANY ROOM TO PARK ON THE STREET ,WE HAVE CONGESTED ROADS AND HIGHWAYS THE STREETS AND ROADS ARE BUMPER TO BUMPER BUSH SHOULD USE THAT MONEY TO IMPROVE AND REPAIR ALL THE ROADS THAT DAMAGE THE UNDERNEATH OF CARS .
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12-20-2008 @ 8:32PM
TAMMY said...
I AM TORN BETWEEN BAILING OUT THE AUTO MAKERS AND THE MILLIONS WHO ARE SUFFERING DEEPLY WITH DEBTS THEMSELVES. NO JOBS FOR THE POOR. NO HELP IN SIGHT. CAN'T WE JUST ONCE HELP THE FAIR, HARD WORKING CLASS. HOW MUCH MONEY AND HOW MANY TIMES DO WE NEED TO HAVE TO BAIL THEM OUT. LET'S HELP THE ONES WHO HAVE STRUGGLED FINANCIALLY FOR YEARS. LET'S CREATE NEW JOB'S PAYING A FAIR WAGE. THE PAY THAT THESE PEOPLE RECEIVE IS ENOUGH IF DIVIDED BY THIER PAY TO PAY AT LEAST ANOTHER 5 PLUS PEOPLE WHO WOULD BE MAKING $10.00. CAN WE SURVIVE ON $10.00 AN HOUR. IT WOULD CERTAINLY BE BETTER THAN NOT WORKING OR WORKING MINIMUM WAGE. YES, THESE PEOPLE HAVE A LOT TO LOSE BUT SO DO THE REST OF US. WE HAVE NEVER BEEN BLESSED WITH AN EXTREMELY OVER PAYING JOB WITH GREAT INSURANCE AND SO ON. THEY ARE JUST SPOILED HIGH CLASS PEOPLE. TRY TO LIVE ON WHAT I RECIEVE EVERY MONTH. I HAVE WORKED OVER TWENTY YEARS. I AM NOW DISABLED AND I THREE CHILDREN AND I RECIEVE A BIG WHOPPING $680.00 A MONTH. NO HELP FROM ANYONE. TRY MY WORLD!
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12-21-2008 @ 11:18AM
griefgiver1 said...
Why should we bail out the auto industry? We didn't bail out the airlines and some went bankrupt but the industry remains. Those that remain are those that cut costs from the get go. Let the "Big 3" go under, we still have Honda, Toyota, Mazda, Nissan and other foreign cars we can purchase and quite frankly, more economical and more dependable. GM, Ford and Chrysler made their bed, let's let them sleep in it.
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12-21-2008 @ 11:23AM
Video Phone Dealer said...
Does the whole World not understand that American workers make who knows how much more assembling autos than any other country autos are made? We can't compete especially when the rest of the world knows and understands vehicles need to shift to more economical and greener technologies. We can't keep abuse our world and being gluttons to our own demise!
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1-02-2009 @ 10:31AM
Scott said...
We as the general public may not have government bailout but there are still other ways to settle one's debt. There is debt settlement, debt consolidation, loan modifications and bankruptcy. Although they may not be the most desirable routes they are still avenues for relief. Look at http://www.speedyfastcash.com as many of these programs are available there.
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