Possible big bucks for Detroit bailout
As General Motors goes, so goes the country. It’s an old saying that hopefully does not hold true today. As all of the Big Three Detroit automakers reported their sales last month declined at least twenty percent from last year, there is new talk of the government bailout. The latest price tag from CNN predicts that the loan package split between General Motors, Ford and Chrysler could be as large as $50 billion.
Detroit seems to be betting it future on shifting from producing large vehicles to hybrid technology. But the change is a long, tough road. "Funding such a shift is a tough lift even under optimum circumstances," said GM spokesman Greg Martin. "The credit markets are suffering. You had this seismic inversion of the market where no one wants to buy a full-size truck.”
In an election year, the fight for funding has become very political. The Big Three have all dispatched lobbyists last month to go hunting for new cash. This has resulted in both presidential candidates Barack Obama and John McCain supporting loans to auto companies in order to gain favor with voters in Michigan and Ohio.
While it may seem like large loans or grants to private companies is revolutionary, it isn’t even unfamiliar to the American auto industry. In 1979, the government authorized Chrysler $1.5 billion in loans. This saved the company and was paid back by 1983 – seven years ahead of schedule.