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Archive for November, 2008

Bailouts for Bankers but Nothing for Detroit Automakers?

This is the part of our nation’s surreal economic crisis that seems particularly surreal:

The US auto industry, which employs 3 million Americans in auto plants, parts and supplier networks and dealerships nationwide is broadly understood as being essential to maintaining America as an industrial force.

It’s financial collapse, which even critics of moves to bailout the industry suggest is imminent, would devastate workers, retirees and communities in every state of the nation.

Despite the grumbling from anti-union zealots, the auto giants have radically retooled in a manner that makes the cost of producing a vehicle at a unionized plant of General Motors, Ford or Chrysler roughly equivalent to the cost of running a car off the line at a non-union plant.

And to top it all off: Auto plants actually produce something that most Americans consider to be useful.

Yet, proposals to provide what now seems to be a very small bailout — $25 billion — are currently stalled.

At the same time, the whole of the federal government is scrambling to buy as much as $50 billion in “toxic assets” — bad loans and other products of irresponsible financial practices that are of dubious value — from Citigroup, a global banking concern that makes money by charging working families exorbitant interest rates for credit.

Perhaps, in some wild calculation of American interest, Citicorp is worthy of a bailout.

But what mad calculus would make Citigroup more worthy than the auto industry?

Something is fundamentally wrong with a federal government that offers bankers a bailout and autoworkers as cold shoulder.

Detroit Auto Industry Is Forever Changed Due to Credit Crunch

LANSING, Mich. — Detroit’s Big Three automakers are forever changed by the current credit crisis, according to a study done by a well-known Michigan economics firm.

The study, from Lansing-based Anderson Economic Group, gives a stark peek into the auto business and reports bankruptcy, radical restructuring and even a merger between two of the auto giants are just a few of the limited options the industry has left.

“Although the metaphor has been abused recently, it is indeed the worst crisis since the Great Depression for the domestic industry,” analysts wrote in the summary of their findings. The study projects annual sales for the Big Three may be less than 10.5 million units.That number is down from 16 million in 2007, a nearly 40 percent drop.

On a more positive note, analysts write in the study that they disagree “with the notion that the entire industry is a herd of ‘dinosaurs’ or that the Detroit 3 do not produce vehicles Americans want.”The next 18 months are both critical and full of possibility for automakers, according to the study.

Congress Gives Citibank Bailout Cash But None for Detroit Automakers

The feds pump another $20 billion into teetering Citigroup Inc. and insure $306 billion in bad assets just days after Congress slaps Detroit’s automakers for failing to table “a plan” to justify $25 billion in loans and folks ’round here cry, “Double standard! Double standard!”

Double standard? You bet, but it’s more than a geographic cabal of coastal Democrats and anti-union, pro-foreign auto Republicans from the South that clearly has it in for Detroit. It’s money and political alliances, folks, neither of which the boys at General Motors Corp., Ford Motor Co. and Chrysler LLC have in abundant supply.

How come Citigroup gets a pass and a big fat check? First, failure of its sprawling operations truly would pose a mortal threat to the global financial system. Second, the banking giant is exceedingly well connected to the campaign wallets of the very same folks — and their allies — who are poised to foist draconian terms on Detroit to keep it afloat.

It gets better. This being Thanksgiving Day, launch Google and type in “Chris Dodd campaign contributions.” Up will pop a link to an interesting site called opensecrets.org, a product of the independent Center for Responsive Politics. Who was the top contributor to Dodd between 2003 and 2008?

Citigroup — or, more precisely, its political action committee, whose contributions totaled $316,494. In the 2008 election cycle alone, Dodd received $157,194 from Citigroup’s PAC. From AIG, he garnered $223,478 between ’03 and ’08, taking in $98,100 this year from the beleaguered insurer propped up by $150 billion of taxpayer money.

Unemployment Benefits Extended

WASHINGTON — President George W. Bush signed a bill Friday that extends unemployment benefits by seven weeks, plus an additional 13 weeks on top of that in hard-hit states such as Michigan.

Michigan’s jobless rate now stands at 9.3 percent.

The additional 13 weeks kick in once the unemployment rate in a state hit 6 percent or higher.

“This is really good news,” said Tom Clementson, an Indian River road construction worker laid off a year ago.

“This will give my son and me a longer time to find a job. Nobody is hiring here,” added Clementson, who exhausted his latest unemployment benefit checks six weeks ago. His son also lost his construction job.

Michigan’s jobless rate is its highest since July 1992. The national average is now 6.5 percent.

Big Three Automaker Bailout Meets Republican Resistance

WASHINGTON (Reuters) – A key Republican Senator said on Sunday it was “pretty clear” a $25 billion bailout proposal for U.S. automakers will fail in the U.S. Senate, while Democrats argued saving the industry was critical to the U.S. economy.

The Senate is slated on Monday to begin debating emergency legislation to General Motors Corp, Ford Motor Co, and Chrysler LLC in a special post-election session to deal with the economic crisis.

The leading Democratic plan would authorize up to $25 billion in loans from the Treasury Department’s $700 billion corporate rescue program to help Detroit survive its financial crisis. In return, the government would take equity stakes in the companies and impose limits on executive compensation.