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Week in review: Senate set to vote on bailout request by automakers
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Senate set to vote on bailout request by automakers
Votes are scheduled in the Senate next week on a $25 billion emergency loan package for the Big Three carmakers, and lobbyists are preparing for a furious round of vote-hunting for the three major U.S. car companies.
General Motors Corp., Ford Motor Co., and Chrysler LLC along with the United Auto Workers union, have clamored for the aid for weeks.
They're warning the companies could face collapse before year's end without new government help, and Democratic congressional leaders are pushing to carve out a portion of the financial rescue money for them.
Republicans and President George W. Bush are reluctant to send new money to the carmakers, saying they should instead speed distribution of a $25 billion loan package Congress approved in September to help automakers develop fuel-efficient vehicles.
Senate Majority Leader Harry Reid, D-Nev., plans a vote next week on the package, but House Speaker Nancy Pelosi, D-Calif., a leading proponent of additional action to help the Detroit auto companies, has yet to schedule one, as leaders continue to hunt for the support to pass it.
Senate Republicans hold the key. Supporters of the auto industry bailout are hopeful they can snag 12 to 15 of them to join with Democrats in pushing through the carmaker bailout.
NEWSMAKERS
Unemployment claims reach highest level since after 9/11
The number of newly laid-off workers applying for jobless benefits last week hit the highest level since the period right after the Sept. 11, 2001, terrorist attacks.
The Labor Department reported that new applications for jobless benefits jumped by 32,000 to 516,000 last week.
That nearly matched the 517,000 claims reported seven years ago, and is only the second time since 1992 that claims have topped 500,000.
As the economy weakens, the government's fiscal picture is projected to deteriorate, too, with layoffs cutting into tax revenues and forcing higher payouts for programs such as unemployment benefits and food stamps.
Unemployment, which jumped to a 14-year high of 6.5 percent in October, is now projected to climb above 8 percent.
Budget deficit in October outpaces analysts' forecast
The initial costs of the government's economic bailout efforts sent the U.S. budget deficit for October soaring, putting it on track to reach the once-unfathomable sum of $1 trillion for the year.
The Treasury Department said the $237.2 billion deficit for October, the highest ever for a single month, reflected the $115 billion spent last month to purchase stock in eight of the country's biggest banks, the opening phase in the $700 billion rescue of the financial system passed by Congress.
On Capitol Hill, some of the largest U.S. banks sharing in the $700 billion government bailout tried to assure lawmakers they are using the money to make more loans and help financially strapped homeowners avoid foreclosure.
The deficit was far bigger than analysts expected, more than four times larger than the October 2007 deficit of $56.8 billion, and more than half the total for all of last year.
A good week for...
Gas pumpers: Retail gasoline prices dipped for a 17th week since July 4, falling below $2 a gallon in a number of states.
A bad week for...
Terrence Lanni: The chairman and chief executive of casino operator MGM Mirage Inc. announced his retirement Thursday amid questions that he falsified his biography in stating he earned a master's degree in finance from the University of Southern California.
Posted by dcsfancy on November 17, 2008 at 8:33 p.m. (Suggest removal)
Crash of US carmakers risks three million jobs
James Doran
Guardian
November 17, 2008
Three million jobs could be lost in a year if America’s so called ‘Big Three’ carmakers - General Motors, Ford and Chrysler - are allowed to collapse, an expert predicts.
David Cole, head of the Centre for Automotive Research (CAR), an influential Detroit think-tank, said that so many US businesses depended on the Big Three for survival that allowing even one of the carmakers to fail would lead to tens of thousands of jobs losses nationwide.
‘The immediate shock to the economy would be felt well beyond the Detroit companies, negatively impacting the US operations of international manufacturers and suppliers as well. Nearly three million jobs would be lost in the first year if there was a 100 per cent reduction in Big Three US operations,’ Cole said.
His grim prediction came as US politicians continue to debate whether the government should extend financial relief to the carmakers by allowing them access to a portion of the $700bn (£382bn) bail out offered to the nation’s banks.
A bill to rescue GM, Chrysler and Ford with $25bn in emergency loans will be taken up in the Senate tomorrow, but its passage is far from guaranteed as many Republican senators object to government intervention in industry. Even if it is passed, many experts fear that tens of thousands of job losses can not be avoided.
Patrick Anderson, chief executive of the Anderson Economic Group, a US consultancy, believes that at least 35,000 jobs will be lost if the government intervenes to save the industry. ‘The necessary restructuring to take capacity out of the market would lead to between 30,000 and 40,000 job losses nationwide,’ he said.
Posted by dcsfancy on November 17, 2008 at 8:37 p.m. (Suggest removal)
He said the failure of one carmaker would lead to between 60,000 and 80,0000 job losses nationwide.
Cole said: 'The likelihood of one or two of the Big Three ending operations is very real.'
Job losses among suppliers of car parts and car sales companies, as well as those on the production lines, would be compounded by a massive drop in taxes and consumer spending power that would further cripple the already hobbled American economy.
'Our model estimates that a complete shutdown of Detroit three US production would have a major impact on the US economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments,' said Sean McAlinden, CAR's chief economist.
'The government stands to lose $60bn in the first year alone, and the three-year total is well over $156bn.'
Posted by TOaksResidence on November 17, 2008 at 10:23 p.m. (Suggest removal)
This is a tough pickle we are in. Do we bailout Detroit's GM, Ford and Chrysler only to let them to run the companies further in the ground? One wonders if all we are doing is delaying the inevitable?
GM especially does not have the ability any longer to compete. It's always been all about smoke and mirrors.
Today, GM lacks design, dependability, service, etc, etc. My last GM bought was in 1985 and Ford in 1995. Today we own ALL Japanese cars that last twice as long, designed better, higher resale, and when it has 200K miles, it still runs like new.
I met a GM senior engineer back in the late 70's and he discussed in detail how GM's main priority was to step up the "built-in-obsolescence" where critical parts wear out faster so we buy cars faster.
GM is also much too slow in developing current vehicles. Take the Camaro, a bit late I'd say? Roll it out after the Mustang, Challenger and after gas prices rise to record levels. The bone head executive claimed the reason it took so long was because he wanted to be really really sure it was developed well.........I think he had just one too many stupid "focus groups" and "steering committees". Unfortunately, the car they may one day release isn't bad looking but in my opinion misses the mark after he kept changing the appearance further and further from the original concept to make it look more modern........so much for the retro look eh?
GM won't survive without a very huge and continued subsides. The don't have a capable executive team....period. GM will end up being owned by a third world country company in 2 years at best.
It's not just bad management though. The union has also helped kill the industry with their constant demand for higher and higher wages than the imports brands.
Between unions pricing us out of the market, US taxes to do business here, environmental mandates, incompetent management this country seems to produce, workman comp issues,etc, were not far from becoming a third world country ourselves. Now don't say that us becoming a third world economic ranked country isn't possible.........a few years ago, people wouldn't believe GM would go broke either.
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