News is out today that Chrysler, along with GM and Ford, will most likely receive somewhere in the neighborhood of $25 billion in government loans to "assist" them in advancing innovation. American automakers are certainly "not too big to fail". If anything the long, slow decline of one of the three would prove a boon to consumers. Keep in mind, as I noted before, Chrysler is not a public company. Private equity firm Cerberus owns an 80% share of the company. If Chrysler dies, the entire loan industry doesn't go up in flames, a few board members of one of the wealthiest companies in America do.Chrysler obviously won't be going up for sale anytime soon as I previously surmised. This isn't the first time Chrysler has received government help. In the late 70s the company received $1.5 billion in loan guarantees to avoid bankruptcy. Back then, the company used the money to settle workers' issues (health care and wage raises) and instead of "innovating" took to bashing Japanese companies and advocating buying American. This, ladies and gentlemen, is the very definition of moral hazard. Let's hope we are not being hoodwinked again.
(Photo: Bruce Campbell)
2 comments:
lembo - correct me if i'm wrong here. there was a bill last year that mandates weighted average MPG standards by 2020. but, like a lot of legislation, there's a provision that the incremental standards can be waived if they're too hard to meet. aren't the big 3 pleading for government loans to meet the same interim fuel standards that they're lobbying to be waived YEARS from now?? how can you, in good conscience (maybe that's the problem), say you need money to conform to standards that you're simultaneously lobbying for exemption from? the same standards, by the way, that Hyundai has said it will meet EARLY, with more efficient current technology (ie: better internal combustion engines, not new types of hybrid technology, etc.).
at least in the 70s/80s the loan was structured so that taxpayers got their money back. these subsidies will disappear, and it's pretty safe to assume they'll never get used to make better cars. the saddest part of all is I'm sure they'll get both the subsidies and the waivers.
Shenanigans HAS been called, i'm off to a remote island where i can't be held liable as a taxpayer for other people's laziness and incompetence. we'll have beer, though.
Bradley,
Your point is correct...and in agreement with mine. The legislation passed last year did mandate specific MPG requirements and the big 3 are trying to have their cake and eat it too. We apparently have not learned anything from history. Yes, the loan in the 70s was STRUCTURED to be paid back, but this never happened. The UAW won greater pension concessions and the automakers slyly backended out of their obligations.
You're absolutely right that the automakers will get the subsidies and the waivers (as they did 30 years ago) and this is my concern. If foreign companies like Hyundai offer consumers a better product and the big 3 suffer as a result that is fantastic. The companies should suffer and the government should not slow, stall, or prevent their decline.
Shenanigans has most certainly been called.
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