Why Auto Bailout More Resisted Than Bank Rescue? Fox news?
According to Argus analyst Kevin Tynan, GM had a net cash shortfall of $13.8 billion at the end of 2005, then another shortfall of $12.3 billion for 2006 and then again $12.1 billion for 2007. Tynan expects it to burn through $1 billion of cash per month.
The automakers keep screaming, Why did the banks get bailouts and not why not us? Simply put: You don't make money. The chance of getting the loans paid back is slim.
Niether Reed nor Pelosi can line up their party.
Also, the black caucus and hispanic caucus loved the bailout because it meant the government will pay the mortgages for their voters in CA, etc.
The Dems are grilling and showing little support for GM and Ford during the hearings.
It seems to me the federal government might be better off using half that money to finance new American car and truck purchases since consumer spending is what this country desperately needs. If you lend the full cash price at a nominal interest rate and spread it out over 90 months, then people can buy the new cars they want and pay the government back with interest.
Lend the auto makers the $25 billion to re-tool their plants in order to produce greener cars, and be prepared to provide D.I.P. financing or merger financing if it makes economic sense to do so. But I would rather spend $1 billion a month on financing new car/truck purchases, and providing tax credits for the high mileage cars/trucks, than take a chance on any one of the Big Three right now given the enormous obstacles in terms of their future viability.
Otherwise, I would form an entity to purchase GM and Chrysler at their current value, merge them, establish a new business model, and if GM-C can make a profit in the car/truck business, then the federal entity can sell the business back to an ESOP-vehicle for fair value at that point in time.
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