how much money might the big three expect?

The folks at Canada’s Globe and Mail don’t think it’s any coincidence that Michigan Governor Jennifer Granholm was positioned just over President-elect Obama’s shoulder during his first press conference. They think it was a deliberate sign. Here’s a clip:

…Granholm was there to send a message, the message being that Obama knows he owes Michigan and the payoff is coming. Fast. Just in case anyone missed the visuals on Friday, Obama and the Democrats went to work on the weekend, too.

Obama’s incoming chief of staff, Rahm Emanuel, called the Detroit auto companies “essential” to the U.S. economy in interviews Sunday. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid (Democrats, of course) sent a letter Saturday to President Bush, calling on him to release some of U.S. Government’s $700 billion in aid paid to help the auto companies, too.

No one seems quite sure how aid for Detroit will materialize, but it’s coming, no doubt about it…

According to the New York Times, Emanuel, when pressed on Sunday morning, would not say whether or not President-elect Obama supported the idea of tapping into the $700 billion “rescue package” for the purpose of aiding the Big Three. He did say, however, that Obama, “asked his economic team to look at ways to involve the industry in shaping an energy policy that weans the country off foreign oil, seeking ways to use the $25 billion in loans that Congress passed in September to help make auto plants more capable of producing fuel-efficient cars.”

So, despite the signals picked up by the Canadian press, it remains to be seen at this point if more than the $25 billion loan already green-lit for Detroit will be making its way to the Big Three.

[This post was brought to you by the most recent episode of PBS’s investigative series Frontline, which focuses a great deal of attention on the roadblocks thrown up by the Big Three and Congressman John Dingell to prevent more aggressive fuel efficiency standards, like those recently proposed by California… One would hope, if the Big Three do receive additional federal funds, it would be with the stipulation that they stop fighting California in the courts, and turn their attention instead toward making green vehicles that people want to drive.]

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  1. Meta
    Posted November 11, 2008 at 8:54 am | Permalink

    From the Financial Times:

    Lawmakers and business groups are pushing for the Bush administration to aid the car industry in three ways. The first would be a faster disbursement of $25bn that were already appropriated for the carmakers to make energy efficient vehicles. The second is allowing the finance arms of the carmakers to participate in the capital purchase programme of the bailout bill. But the most dramatic move that many in Detroit are hoping for is a direct loan, possibly in exchange for equity or warrants.

  2. Meta
    Posted November 11, 2008 at 8:57 am | Permalink

    Also from the Financial Times:

    It would be a bad bet to reward Detroit for failures

    Sir, News reports suggest that Democratic leaders in the US Congress favour more billions in life support for Detroit’s failing car companies (on top of $25bn to retool their plants for fuel-efficient cars), despite widespread recognition of their inability to compete over decades of opportunity.

    Given global overcapacity among car manufacturers, it would be a bad bet against experience to once again reward Detroit for its failures. To even imagine a rescue that leads to survival as self-sustaining companies will take billions upon billions. Jimmy Carter’s bail-out of Chrysler in 1980, highly controversial at the time, involved a mere $2.3bn loan guarantee. Yet William Proxmire, then Democratic chairman of the Senate finance committee, imposed on Chrysler and those having economic stakes in its survival a set of draconian measures intended to deter any other private corporation from seeking Federal aid. Today, the bail-out line is long, while memories of Senator Proxmire’s noble effort to save private enterprise from the temptations of moral hazard are short.

    The US government must choose among competing claims on its funds, which are not unlimited. The Federal Reserve has already injected $1,700bn into the private sector. Funding levels next year are likely to exceed twice the 2008 level.

    I hope that President-elect Barack Obama will favour infrastructure funding to state and local governments over a Detroit bail-out. Doing so would provide one answer to the job losses that will result in the auto sector if one or more of Detroit’s Big Three fail.

    When the country has so many job-filling projects that need to be undertaken, including those aimed at reducing our carbon footprint, it would be a grossly negligent breach of public trust to spend billions on sustaining this trio.

    Bevis Longstreth,

    New York, NY, US

  3. Karl
    Posted November 11, 2008 at 9:14 am | Permalink

    One more article to consider.

    Obama Asks Bush to Provide Help for Automakers


    President Bush indicated he might support some aid if Democrats accepted a free-trade pact with Colombia, people familiar with the discussion said.

  4. Old Goat
    Posted November 11, 2008 at 12:43 pm | Permalink

    Response to Meta: 1. The U.S. auto industry has competed successfully with the Japanese and builds cars of comparable quality, the problem is now more of public perception. 2. The ability to compete has been hamstrung by unfair trade packs that limit the sale of U.S. built cars in foreign markets, i.e. Japan. 3. The Chrysler loan guarantee, (misnamed “bailout”), was successful and did not cost taxpayers one red cent while preserving thousands of high wage, manufacturing, jobs. 4.Infrastructure improvements (which could have avoided the deadly collapse of the bridge in Minneapolis last year), is only one place thats needs attention. It would be foolish to put all the aid into only one basket. 5. It would be a breach of the public trust to not prop up these jobs and allow the further erosion of same jobs from our shores. The industrial might of America is what defeated our foes in WWII. A solid manufacturing base is as much a matter of national security. 6. After being slammed by the oil industry, the auto manufactures now are being slammed by the banking industry. At some point, the demand for new cars will increase. It would be a mistake, when this occurs, if your only choices were imports.

    I would like to see the U.S. auto industry become more involved in improving mass transit. This would reduce the carbon footprint but at the same time runs counter to the industry goals, which is to sell more cars with each consecutive year. The American auto industry needs to learn how to make cars profitably on something other than just volume increases. But this is not easy, given the cost of development and tooling. Note that the first car off the assembly line costs billions of dollars. It’s not until number (92453?) rolls off that profitability becomes achievable.

    Don’t sell us out Meta. Your neighbor maintains his house, pays his taxes and sends his kids to college on the hard earned wages of the auto industry. To lose this pillar of the economy would only hasten this downward economic spiral.

  5. Old Goat
    Posted November 11, 2008 at 12:46 pm | Permalink

    I understand that you were only quoting Bevis (the butt-head), from NY. No personal assault was intended. -Og

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