Green "Correction" in Auto Sector Leaves GM Clinging to Government Loans
To adopt some economic policy lingo being bantered about quite a bit these days, the green "correction" to the U.S. auto industry is in full swing. GM leading man Mr. Fix-It Bob Lutz sums up the pain thus -- that the auto industry was faced with three simultaneous crises:
1) mortgage crisis, 2) soaring gasoline prices (doubling over 24 months) that wiped out the pickup truck and sport utility vehicle market (mission accomplished, TreeHuggers*) and 3) governments creating new, stringent targets for fuel consumption instead of a gradual transition via increasing gas taxes in order to change consumer behavior. In fact, GM does very directly see itself in a similar sinking ship as the the finance industry, and likewise in need of a life raft. Supporting man Ray Young, chief financial officer of General Motors Corp. sees the credit crisis roiling Wall Street makes the $25-billion loan package for U.S. auto makers even more critical than it was a month ago.
It becomes a lot more important for the auto makers to get these loans to make sure we can continue funding investments in advanced technologies.
While the entire U.S. financial system is on the verge of a meltdown, the Detroit Three have sent a letter to Nancy Pelosi, Speaker of the U.S. House of Representatives, urging her to make sure the legislation is passed. The fear is that the U.S. government's bailouts of selected financial firms might cause Congress to balk at loan guarantees for the car companies. If the $25-billion in financing - already approved in a U.S. energy bill last year, but not yet enacted - is scrapped, Mr. Young 's additional comments suggested that auto makers may have to merge to live to fight another (let us say "green") day.
* we're looking forward to the development of functional pickup trucks and SUVs which are sustainable and not interested in such vehicles being wiped out.
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