US Govt gives automakers $25B in loans; drops fuel-efficiency mandate

By Peter Forman
Published: November 14, 2008
New York–This is a Breaking News analysis as of Friday, Nov 14, 2008, 5:30 pm.

The United States continues to “perpetuate” a broken auto industry.

Because of pressure from Detroit, unions, and Michigan lawmakers, the “Big Three” auto makers have been insulated from the real market-place of competition for the past 30 years. The Japanese and Germans have figured out how to build cars in the American South profitably–but not the Big Three.
 
Looking at this from a Darwinian perspective, the US auto makers were protected from the same marketplace pressures to which the world’s other car makers were exposed.  The extra profits they were able to generate by virtue of this protection essentially went to the workers and to shareholders.

That’s fine and good except now we have a completely broken auto industry that is unable to compete.  Now exposed to declining demand and lacking access to “cheap” capital, they are likely to disappear in their current forms–even after we spend untold billions in short-term assistance.
 
For years they fought everything from seatbelts to higher mileage standards to bio-fuels.  The unions and the companies are victims of their own self-inflicted damage. 
 
Now there is breaking news that President Bush, later this afternoon, has called on Congress to give U.S. auto makers quick access to a $25 billion federal loan program by dropping a requirement that the money be spent on converting to fuel-efficient vehicles. (emphasis mine) 

The move, aimed at ending what the White House called partisan “gridlock,” represents a significant escalation in the political battle over aid to the Big Three auto makers.  This is ahead of an expected showdown next week in Congress between Democrats and Republicans.
 
We taxpayers, the investors-of-last-resort, should at least expect that these bail-out monies be invested in a way that prepares the car companies for the future and that serve our national-security and economic interests. It is the very least we can demand and expect. 

While we are unlikely to ever see a return of these funds, the car companies could at least agree to manufacture all cars beginning in 2012 with flex-fuel compatibility and continues progress towards EVs (electric vehicles).

Without at least those commitments, what will we have to show for this “investment”?

Demand that your Congressperson and Senator act–call today!
Demand loans only in exchange for the Open Fuel Standard Act.
Demand that, for once, we begin to move beyond oil.
 
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