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post #1 of 1 (permalink) Old 11-04-2008, 12:20 PM Thread Starter

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Post Detroit Bailout New York Times Critique

The New York Times has written a column on the whole Automotive saga that is making it’s way into the headlines day in and day out. The article singles out the possibility of the Chrysler GM merger and the inability of the U.S. government to provide support.

In the opinion of the newspaper, the Big Three employ too many people to be put into jeopardy in case either one of the companies fail. It has also brought up a very valid point, that the funding that has been made available to the companies in the form of re-tooling costs in the sum of $25 billion, will not be available to them for some time to come. This is due to the slow moving banking system and it’s legal teams to work out the details of the plan. In the meantime all three manufacturers are losing money every month.

Cerberus Capital Management LP the private equity firm that is burning through cash on all fronts, including losses at it’s finance unit GMAC, as well as through Chrysler LLC has been very keen to sell of it’s Chrysler holdings to General Motors. General Motors on the otherhand, would like a government infusion of funds in order to complete the purchase.

The newspaper clearly states, that there should be strict conditions on government lending should it offer to bail out the companies. Everything from not paying dividends, to the firing of all top executives has been brought up. The Federal Government is too busy at the moment getting the finance industry straightened out, after which it might focus on automotive.

It is important to note, that the companies that are affected by these bailouts are very much on the top of their foodchain, meaning secondary industries which supply them might fall as well should they experience financial hardship. This translates to millions and millions of jobs disappearing overnight and uneployment increasing.

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