Bailout mania continues. George Bush will give the Big Three automakers a whopping $17.4 billion loan package from TARP funds in order to keep them limping along until March 31:
The government will offer up to $17.4 billion in loans to the ailing U.S. automakers and expects General Motors and Chrysler LLC to access the money immediately, a senior administration official said on Friday.
Some $13.4 billion will be made available in December and January from the $700 billion fund that was originally designed to rescue struggling financial institutions, but the loans would be called back if the automakers cannot prove they are viable by March 31, the official said.
Viability would be mean that the companies must have a positive net present value, which doesn’t necessarily mean immediate profitability but would require them to reach that point relatively soon, the official said.
So the government, already in debt over 10 trillion dollars, will use its line of credit to give a loan to companies going bankrupt from their own debt load — and demand viability in 100 days. Who wouldn’t love that deal?
Supporters of a government bailout of the auto industry managed to hoodwink the administration in part through some very misleading statistics. They claim that 10% of all American jobs get direct or indirect support from the Big Three automakers, a claim repeated by Senator Carl Levin on NBC’s Meet the Press. ABC News says that they’re off by a factor of almost seven:
In an effort to convince Congress to bail out the U.S. automakers, company executives, union leaders and politicians have made the compelling argument that the industry directly and indirectly supports one in every 10 jobs in the country. The only trouble is nobody wants to take ownership of that statistic, which is almost certainly false.
The figure is routinely attributed to the Center for Automotive Research, but officials at the nonprofit organization, which has ties to labor and government, claim they never said it and have no idea where it came from.
“It’s such an exaggeration. I kind of grit my teeth every time I hear it,” said Debbie Maranger Menk, a project manager at the center who researches the industry.
The Center, she said, estimates some 350,000 people in the United States are directly employed by automakers, both foreign and domestic, and that 2.1 million jobs are indirectly connected to the industry including suppliers.
That 2.1 million jobs figure is in line with what most economists estimate to be the number of people supported by vehicle manufacturing, according to economist Richard Block a professor at Michigan State University’s School of Labor and Industrial Relations.
We have over 135 million jobs in the US. Anyone claiming 10% of American jobs is related to the auto industry would have to show almost 14 million people working directly or indirectly for the auto industry in general. The auto industry as a whole in the US affects a seventh of that, and GM, Ford, and Chrysler would only affect a portion of those 2.1 million jobs.
Well, now the auto industry affects all of our jobs. We’re all coughing up enough money for a down payment on a new car from every family in America, only without actually getting the car. And even if we’d used that money to buy a new GM, Ford, or Chrysler instead of it being a loan, none of the three would have shown a profit from the sales anyway. They’re losing money on every car they sell, and neither management nor labor shows much interest in changing those calculations. They just want a Governmentus ex machina to rescue them from their own folly without having to sacrifice anything … and George Bush just gave it to them.
Update (AP): Here’s the announcement.