Loans for the Big Three Automakers

Friday, August 22, 2008
McCain supports loan guarantees for automakers

WASHINGTON -- Republican president candidate John McCain joined his Democratic rival Barack Obama in supporting efforts to give Detroit's Big Three automakers up to $25 billion in loan guarantees -- a move that boosts the prospects for passage considerably in September.

Obama said in July he would support the effort to fund low-cost loans for automakers to retool their plants. It would cost $3.75 billion to fund the program known as the Advanced Technology Vehicles Manufacturing initiative. Congress approved the $25 billion program over five years in the energy bill passed in December but didn't authorize any money to fund it.

How not to rescue the Big Three

To persuade US lawmakers to pass an emergency loan for them within weeks, executives from General Motors, Ford, and Chrysler were out in force at the party conventions in St. Paul, Minn., and Denver to plead that the industry is "deserving" of government credit.

Deserving? Years of mismanagement, high executive salaries, and overly generous worker benefits have indeed hurt the Big Three. Last month, their new car sales were down by double digits compared with a year ago. The decline has left them with low credit ratings, making it difficult to borrow.

US airlines have been able to retool themselves through bankruptcies, mergers, union concessions, layoffs, and other difficult steps. After the national disaster of 9/11 that closed down the air system for a week and disrupted air service for weeks, they received emergency cash and $1.17 billion in government loans – but that came with strict oversight and tough restrictions.

Congress shouldn't rescue an auto industry and its unions that aren't doing enough to rescue themselves. The federal government is already trying to save one public-private partnership, Fannie Mae and Freddie Mac. It doesn't need to become a credit master to another faltering industry.;_ylt=AoxY8zFetUlXeTPMa...

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This is wrong, but it is an election year. No one has the guts to give them tough love.

And the theme is change, change, change, 24 hours a day, seven days a week.

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