U.S. Auto Industry's Three-Months Life Support
The White House says if GM and Chrysler canâ€™t come up with a plan for viability by March 31st, then they will have to repay the money. Thatâ€™s like giving a panhandler $1,000 dollars and telling him to repay it in three months. The White House knows that the conditionality is foolish and unrealistic.
[Black Star News Editorial]
The truth of the matter is that the American car industry as we know it as dead despite the $17.4 billion bailout okayed this week by president George W. Bush which is merely meant to temporarily avert chaotic collapse and keep the life support machines on.
General Motors and Chrysler will either merge and then team up with Ford Motor Co, which still reportedly has anywhere from $15 billion to $20 billion in cash, or they will disappear.
In the long-run, they may form the foundation for the factories that will eventually produce the so-called green cars. In the process, tens of thousands of people will lose their jobs –because the newly reconfigured companies will require lean staffing until there is effective demand for their products.
The money Bush gave GM and Chrysler came from what remained of the $350 billion Treasury Secretary Hank Paulson had been authorized to spend; it’s half of the $700 billion economic rescue package okayed by Congress in October.
The conditions imposed for the government loans to GM and Chrysler are not realistic. The White House says if GM and Chrysler can’t come up with a plan for viability by March 31st, then they will have to repay the money.
That’s like giving a panhandler $1,000 dollars and telling him to repay it in three months.
The White House knows that the conditionality is foolish and unrealistic. It was made for political reasons; that’s why a White House fact sheet states that the conditions are "non-binding."
The so-called bailout is only meant to extend the employment of GM and Chrysler employees for a couple of months. They cannot in the short term produce cars that can be sold; not only because the fuel-efficient cars favored by the Barack Obama Administration cannot be produced within a short time, but also, no one currently has money to buy cars.
Even the Japanese auto companies are cutting down their production by as many as 30% or up to 200,000 cars, because of weak demand for these automobiles. So, it’s clear that the U.S. is not saving the auto industry so that they can produce and sell cars. It’s a gap-measure; a band-aid approach to stanch the flood.
The money will all be gone, burned up in salaries, bonuses, legacy payments –to retirees—and other operational costs. Then President Obama will be faced with the choice that Bush had to make this week.
Pull the plugs or maintain life support? We will find out in a few months.
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