IS AMERICAN MOTORS MAKING A COMEBACK??
As I am typing, the leaders of Detroit's Big 3 automakers GM, Chrysler and Ford as well as Ron Gettlefinger, president of the United Auto Workers Union are sitting down with House Leader Nancy Pelosi to discuss the dire position the American Auto Industry is in. Could this result in government aid for the three to merge into one viable company? A friend (an industry insider) has suggested that it could be called American Motors (AMC)!! In a couple of years Renault could acquire it – wait a minute I think I am sensing déjà vu!
It is suspected that General Motors will reveal that their cash burn actually exceeds the astronomical figure of $1 billion a month that has been speculated. Analysts also believe that they will reveal a cash reserve of less than $20 billion with $14 billion being the magic threshold number for insolvency. Ford and Chrysler are likely in a little better shape, but not much.
The automakers are looking for government aid to help them survive the current economic meltdown which was not of their own making- it was made by those greedy wall street types who were all over cable business news channels today saying that the automakers should have to live in the bed they made for themselves! REALLY??? The automakers have been making mistakes for decades, but it seems to me that many industries have (Wall Street anyone?). The credit crunch did not descend from the sky, it was made by the banking institutions in this country, and I seem to recall that they are receiving government aid. Why didn't they have to sleep in their own bed? Are the automakers paying for their mistakes? Big time! Is the current liquidity crisis stemming from incorrect product mix? NO!
It will be far worse for the economy to let the big 3 fail in bankruptcy than to loan them cash at reduced rates for the short term. CNBC has a poll out asking if the government should give more money to the auto industry. More money??? They haven't gotten any money at all yet. And the $25 billion loan program that the Department of Energy is running is in response to the new regulations that Congress imposed on the automakers earlier this year. It was known that the timeline they imposed on the automakers to comply with the new CAFE standards would require them to spend $100 billion in the near term. And by the way, in reading the rules for the DOE program which just came out today, you don't have to worry about the big 3 using these funds, they won't qualify, as they have to prove long term viability which cannot be done when they have no access to a market for short term funding!!!
Tracey A Smith
The Karma Report
Editor , thekarmareport.com