Auto Industry Bailout Stalls Out In Senate
While the House voted last night to approve a $14 billion emergency bailout of the auto industry, the measure has so far stalled out in the Senate. Without the bailout both GM and Chrysler aren’t not expected to last much past the beginning of the year.
The proposed bailout is much less than the $34 billion which the Big Three auto makers were asking for during Congressional hearings over the past month. While the $14 billion should be enough to keep them afloat it does nothing to address Detroit’s need to revamp their production plants in order to manufacture more fuel efficient cars and compete with foreign auto makers.
While $14 billion may seem like a pittance compared to what the government has already spent on the financial system, there is major difference between the two industries. With AIG and Citigroup which both received over $100 billion in government loans, one can realistically assume that these two companies will return to profitability once the economy normalizes, however the same can’t be said for the automobile industry which has struggled for decades.
Many people feel that even with the bailouts, the Big Three auto makers need to go through massive restructuring that is typical during bankruptcy proceedings. The airline industry is usually the prime example used when most people think what needs to be done with the auto industry, most major airlines have had to undergo Chapter 11 bankruptcy proceeding at one time or another but were able to return to some sort of profitability.
A compromise in the Senate though will likely be reached if only because of the potential loss of over a million jobs at a time like this. With the unemployment accelerating in the past three months the potential collapse of the auto industry would send those numbers skyrocketing.
When it’s all said and done though, it will most likely be an imperfect solution to an imperfect industry.
