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Paulson: Congress Could Help Automakers

Treasury Secretary Hank Paulson said Congress can help struggling automakers by changing the terms of the $25 billion in direct loans recently approved for Detroit.

Automakers -- facing plummeting sales, impossible-to-get credit and shocking cash-burn rates -- are teetering on the edge of viability. They have been asking Washington for help and last month, $25 billion in loans was approved.

But that $25 billion is meant to be spent on retooling factories to produce more fuel-efficient vehicles -- essentially turning truck and SUV plants into hybrid car plants.

But an increasingly desperate GM, Ford and Chrysler are saying: We need cash. Right now. To stay in business.

Paulson's comments today seem to signal the Bush administration's stance: We would be receptive to Congress changing the terms of the $25 billion direct loans so Detroit can use the money to stay in business and worry about retooling factories later.

Paulson was clear on one point: the $700 billion bailout/rescue plan approved by Congress is for investment, not for spending, so Detroit bailout money cannot come from that pot.

-- Frank Ahrens

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By Frank Ahrens  |  November 12, 2008; 11:43 AM ET
Categories:  The Ticker  
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Comments

I understand that the auto makers need cash to operate on a daily basis, but how about this. All executives making in excess of $100K a year take payless paydays until Obama is in office, and the $25 Billion goes to the necessary retooling to make efficient vehicles? The auto maker's executives have been making out quite well for some time now, no matter how slow sales are. It's time for them to give back.

Posted by: mtnmanvt | November 12, 2008 2:08 PM | Report abuse

I assume that by "staying in business", they are wanting to keep the executives in their position while they struggle to keep the businesses operating. Meanwhile out here in the boonies, small factories connected to the big auto manufacturers are hanging in and hoping they will survive this catastrophe. My son works as a welder in a plant that makes frames for Ford pickups. They have not been told if or when the plant will be closed or even if it will be closed. If these plants are to be converted to plants for manufacture of energy efficient autos, shouldn't the people working there be told? As usual, at this point they are only thinking about the executives at the top of the food chain.

Posted by: beccajo | November 12, 2008 2:20 PM | Report abuse

These people are just making it up as they go along. First off, it's a $850 billion package, not a $700 billion one. Oh, unless you include the $140 billion that they were secretly doling out while they had everyone's attention focused on the original $700 billion they asked for.

Bottom line is that this is just another scheme to stir up a lot of money so the Bushies can grab as much as they can carry on their way out of town. You KNOW they don't know how to "fix" anything and probably never intended to.

It's the biggest involuntary sex crime in the history of the World: the screwing of the American taxpayer.

-Wexler

Posted by: WWWexler | November 12, 2008 2:31 PM | Report abuse

Paulson has the interest of these financial institutions at heart. After all, he's a product of that realm of our economy. What we need though is someone in that position who has the interests of America at heart. We need someone who looks at the big picture, someone who cares about the health of our country's economy as opposed to the health of his his own special interests.

His statement is typical of what we hear over and over again from this administration, a policy of giving definition to the rules that best fit the administration's interest.

Posted by: kcooper35 | November 12, 2008 3:28 PM | Report abuse

Though I am a left-leaning Independent, and I understand the implications of non-action, I have reservations about supporting businesses that have followed what I see as "poor business practices." In the case of the financial sector bailout, we were rewarding the risky investment strategies and here we will reward the "big three" car manufacturers for doing little to diversify their gas-guzzling fleets while Japanese companies went leaps and bounds above their heads. In the same way that the argument is made that we should not invest in those lost souls at the bottom of our economy, presumably because of their assumed mistakes, should we not adopt the same philosophy with our car manufacturers? Or, at the very least, if we are going to loan them money we ought to impose stipulations. Otherwise I think the effort to prop them up is lost when they go back to "business-as-usual."

Posted by: SteadyState | November 12, 2008 3:37 PM | Report abuse

Heck. Why not go all out? For the good of the country's executive class. New policy. If you run a large corporate concern and have any debts, just send them to the United States Treasury for immediate payment. I'm waiting for wholesale indictments and convictions of executive-class employees who managed to break the U.S. economy by selling fraudulent securities. I may wait a very long time. But hope springs eternal.

Posted by: BlueTwo1 | November 12, 2008 3:51 PM | Report abuse

All I want to know is how the taxpayer will benefit from each and any of these bailouts? A time will come when the profits flow, and the dividends rain down in buckets. Am I to be the patsy who never sees the rewards for my tax dollars that didn't get used for health care for children, education, energy alternatives and independence, or upgrades to infrastructure?

And I'm not talking about money that goes into the Treasury to be squandered on some pork project . . . I mean what do you, and I, and him, and her get.

Posted by: 173rd | November 12, 2008 4:10 PM | Report abuse

Whether it is the automotive industry or any industry that actually makes a product, the government must make certain that they are helped to survive if at all possible.

Spending hundreds of billions of dollars to protect those who make money by shuffling money (i.e. Wall Street) might be necessary. Doing what is necessary to protect the last vestiges of our manufacturing capability is absolutely essential.

If, God forbid, another world war erupts and we have little or no manufacturing capability this country is toast.

Posted by: mhhaggard | November 12, 2008 4:30 PM | Report abuse

hi
deperate times call for desperate measures, and lesse fare capitalism will fix out the problems? my boathooks...The redistribution of wealth is a marvellous concept,but it will never be adopted by the US will it ?.
Henry Ford will be turning in his greasepit.
The communist philosophy [ not socialist ] thats being adopted to bail out the free market, is not all bad? Free health care for the young eldery, infirm measure ones humanity,not ones politics. Many millions more, may have to depend on handouts to maintain minimal standards of health care so why not introduce a health policy that gaurantees access to medical care for all your citizens..The workers in the auto industry will lose their health insurance packages after they lose their jobs. Who will inherit the earth, the meek of course, did someone say that 2008 years ago.? jimmy the scot

Posted by: JIMMYTHESCOT | November 12, 2008 5:00 PM | Report abuse

Suggesting that executives work for free until Obama takes office is one of the most unrealistic suggestions I have ever heard. Why not make everyone in the whole corporation work for free for the next few months? Surely that would get them back on their feet.

GM and other automakers need the loan - not a bailout plan. They are trying to keep up with changing standards but when you employ such a significant percentage of the work force AND are supporting an insane number of retirees it is nearly impossible. If you deny the automakers the money they need and GM declares bankruptcy you can say hello to an unemployment rate that will have increased exponentially. In addition the government will lose a huge amount of tax revenue and smaller communities (yes, even you out in the "boonies") will lose programs and philanthropic initiatives funded by GM corporation and the like.

I realize that some CEO's earn an excessive salary but this loan doesn't just affect them - it will affect their employees on every level. Bash the executives all you want but until you have had to manage billions of dollars and a corporation that the American people depend on while it's been spiraling downward I would make sure that what you're offering up (unless it's your own salary) is your constructive criticism.

Posted by: lane5 | November 12, 2008 5:36 PM | Report abuse

While Toyota was perfecting the Prius, GM was investing in Hummer. And now they are begging for my tax dollars? The taxpayers this foolish policy burdens are the same people who have been choosing to buy fewer GM and Ford vehicles. Please respect their wisdom. Anyone who claims they believe in the free market, Mr. Obama included, should recognize the fallacy in this. This is a clear example of the government beholden to special interests, taxpayers should urge the government to say NO!

Posted by: willemlutter | November 13, 2008 2:30 AM | Report abuse

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