The trouble lies in expected subsidy cost estimates, which Congressional Budget Office director Peter Orszag recently announced could realistically be set at about 30% - meaning about $7.5 billion of the $25 billion in secured loans would have to be paid by Congress. The same office had predicted a subsidy cost of about 15% earlier this year, but worsening credit conditions at almost all of the major carmakers has caused the CBO to revise its figures, reports The Detroit News.
That result is somewhat ironic, since the reason the industry is approaching Congress in the first place is that its poor collective and individual credit situation is preventing it from acquiring affordable rates on private loans. If the same credit ratings are used to keep government loans from being issued, the industry could be stuck in a very dire position with expensive CAFE regulations in the near future, a soft economy and tanking vehicle sales making for a perfect storm of crippling debt.
Reader Comments
Mon Sep 15 2008 4:16 PM
Craig S says
All I can say is this is insane!! I don't want my tax dollars going towards these companies that simply cannot make a profit because their ideas and products are from the bronze age.
Mon Sep 15 2008 5:14 PM
Guber says
why not use that money to pay back our Social Security? it seems like Congress can alway find money to fund useless projects and unjustify war (Iraq) but when it comes to our SS they don't know how and where to get the money except to raise tax , bunch of "SKIMMERS" ~ Joker". We owe it to the people who pay into this system.
GM has Holden, Opel and bunch of others I don't know (the regulars here probably do) why couldn't they sell off those division? It blow my mind how they can sell more cars than any other makers for the last century and still lose billions.
Mon Sep 15 2008 5:16 PM
Guber says
Does Chrysler qualify? they are privately held, right?
Tue Sep 16 2008 9:08 AM
CarFan says
Craig S, I totally agree.
Is this a Free Market Economy just by name? If their business plans failed - due to poor product quality, design, appeal, etc - what makes anyone think that more (subsidized) money will change anything? As a taxpayer I do not want my taxes being used for subsidizing failure. If a business idea is failed then let it run its course.
For years the public has contributed to this subsidizing by buying American cars simply because they're american. While honorable in its intent this only makes the OEMS complacent and unwilling to compete with others simply because their customer base is blindedly loyal. If we want the Big3 to compete then it is us, the consumers who should buy the best product, if that happens to be Japanese or German, then be it. That will certainly force the Big3 to compete at all levels and change their boring product styling and lack of efficient technologies.
If it were up to me, I would direct these funds only to researching alternative sources of energy (electric cars, hybrid drives, and other innovative ideas), this way they can have a shot at being the leaders in this category and have a valid selling point over imports. Subsidizing more of the same is insane. The same goes for the housing market. Why should the smart taxpayer have to cover the stupid mistakes of those willing to gamble with a variable rate loan so they can keep up with the Jones'???
Is this country about letting people act irresponsibly and stupidly without any accountability? what is this teaching our next generations?
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