|Issue of the Day: Auto Makers Look for Aid Too|
Published Tuesday, November 11th, 2008
As reported, with the Federal Bailout of Wall St. came a the passage of the Troubled Assets Relief Program, a program headed by the Department of the Treasury, through the new Office of Financial Stability. There is precedent in calling for these types of bailouts: in 1930’s, the Reconstruction Finance Cooperation bought $1.3 Billion ($200 Billion in current dollars) in the stock of 6,000 banks, recouping only the same as was invested. In 1984, the government bought 80% of Continental Illinois Bank and Trust, now Bank of America; in the end, the government lost $1 Billion.
Now that the banks have their bailout, other industries teetering on collapse are calling for assistance. The Detroit 3, for instance, are nearing critical velocity as their stock plummets from GM’s $80 in 2000 to near $3 presently. Democrats are pushing for an additional bailout for the big 3, but not without strong conditions such as building more efficient cars and equity stakes to recoup the investment. By changing the mandate of Detroit — to more efficient cars such as those of Nissan, Toyota, and Honda who are all faring the economic climate well — they hope to revitalize the industry and keep jobs here in the US. With the industry already losing money, marketshare, and jobs, GM’s next step will take out 30% or 1,900 of the company’s saleried North American workforce. In total, the motor vehicle manufacturing sector has lost nearly 131,500 jobs from October 2007 to present.