Come on Down to Uncle Sam's House of Loans

As negotiations between the White House and Congress appear to be nearing completion on an inevitable automotive rescue plan, debate concerning the $15 billion dollar bill primarily concerns wording and semantics. The Democratic counter offer to the White House, which has voiced concens about Detroit's ability to survive even if supplied with an infusion of federal cash, addresses issues that the first draft had with promoting future viability and competitiveness. Additionally, the most recent draft grants the government the right to acquire preferred shares of the companies equal to 20% of the amount loaned (Ford is also seeking an additional line of credit).

The automotive rescue bill gained further traction following last weeks unemployment report, as the US economy lost an additinoal 530,000 jobs in November and more emphasis was placed on "saving" 350,000 industry jobs and the percieved millions that depend on it. The White House, however, remained hesitant without gurantees that taxpayer dollars would be paid back, that the automakers would reorganize and become competitive (something they have no been for some time), and that proposals of detailed plans concerning cost cutting and business overhauls would be submitted by March 31st 2009.

Perhaps of most interest, a presidentially appointed "car czar" would be created to oversee the restructuring in Detroit. The designated car cheif would would authorize and directly disburse bridge loans or lines of credit, report periodically to congress, and could even force the automakers into bankruptcy if guidlines werent followed, or restructuing progress was ineffective. At this point it looks as if the ol' Car Czar may not be a single position, but either way the name and idea evoke an image of used car dealership commercial.

No credit? Bad Credit? No viable business plan or competitiveness? Excessive, prohibitive labor costs and nothing that addresses the single most important issue (demand)? Well come on down to Uncle Sam's Lot "O" Loans: where the Car Czar will get you the $15 bailout you need today!

As I've noted before, the government must continue to spend, but it cannot spend blindly. What (viable, strong assets) is just as important as when (ASAP). My biggest question from the highlights of the automotive bill, is how does any of this drive demand? Afterall, it is a lack of demand now, and into the forseeable future, along with stiff competition from those with stronger business fundamentals (cost structure) that has landed Detroit in this position.

I think it's time the government started acting like a Porchse dealer and screen their customers financial viability, and less like a used car salesman.