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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Should U.S. Automakers Get a Bailout?

The Big Three are in Big Trouble and may need government help to stay afloat.

Here's where they stand right now:

- GM, which made half -- half -- of all vehicles sold in the U.S. 45 years ago -- has lost 75 percent of its value over the past five years. The company is in talks regarding a possible merger with Chrysler, which used to be one of the Big Three, but no longer is, thanks to plummeting sales.

- Shares of Ford are struggling to stay above $2 per share. As if the company didn't have enough to worry about with a possible GM-Chrysler merger, Ford's biggest investor -- nonagenarian billionaire Kirk Kerkorian -- is dumping his Ford shares, which has been killing the company's share prices.

Through September, GM sales are down 17 percent, Ford sales are down 18 percent and Chrysler sales are down 25 percent, compared to the first nine months of last year.

To make matters worse, $25 billion in direct loans to Detroit automakers just approved by Congress won't arrive for several months because they are tied up in red tape.

And even before that $25 billion was approved, Detroit said it would need another $25 billion.

Analysts are now saying bankruptcy is a real possibility for GM or Ford, though both companies deny it.

GM is burning cash at a rate of $1 billion per month. Detroit automakers could turn the corner in 2010 when cost-savings from the new union contract kick in, shaving thousands off the production cost of each vehicle.

But with each passing day, it's looking like one or all of the automakers may not make it to 2010 without a government lifeline. They may simply run out of money.

Our question to you: The government has propped up the financial sector, the banks and the insurance companies. Should automakers be any different? And, if not, where should nationalization end?

For instance: A contracting economy means fewer people will go to the movies. Should the Hollywood studios get a government investment?

-- Frank Ahrens

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By Frank Ahrens  |  October 27, 2008; 2:50 PM ET
Categories:  The Ticker  
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Comments

CLEVELAND (AP) -- Lincoln Electric Holdings Inc. reported Wednesday a nearly 39 percent increase in third-quarter profit, though the welding products manufacturer warned of declining sales for the remainder of the year and in 2009
Net income rose to $69.2 million, or $1.60 per share, from $50 million, or $1.15 per share in the same period last year.

Interesting background. Lincoln was an early adopter of the Scanlon Plan which was developed during the Great Depression to save LaPointe Steel. Their productivity is high, so this is how the automakers should operate. Everybody makes money and a bonus for producing. Lincoln lost 40% in revenues from 1981-83 and didn't layoff anybody. It's been that way since the 1940's. Some things don't change. They're going into robotics now. Crisis or no crisis, things need welded. I weld. Keep the presses rolling.

Posted by: moonpenn | October 27, 2008 5:52 PM | Report abuse

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