Thursday, November 06, 2008

Making Lemonade

So, it appears they are going to bail out our auto companies big time. From the WSJ:
Some proposals would offer another $25 billion in low-cost government loans, on top of the $25 billion Congress authorized previously...Rep. John Dingell (D., Mich.) emerged from the meeting calling it one of the most productive of his career and said "the end result would be a good one from the standpoint of the auto industry."
Of course, by auto industry he means UAW, because they are really the only ones making money. Specifically,
The UAW is backing a plan to have the government put money into trusts the auto makers and the UAW established to pay for UAW retiree health care.
So the money bypasses the companies, goes right to the union! Sweet.

But, on the other hand, $50B is a lot of money, meaning that even after, say, $20B for union pensions, Ford and GM will be around for a long time as a great short for equity players. There will always be some suckers out they, so they can lend me their shares.

1 comment:

AHWest said...

The rational thing to do would be to let the capacity flow to the non-unionized Japanese immigrant plants in the US South build American cars. But apparently, better American made cars built at lower cost is "bad for the US auto industry" mostly because those employees aren't beholden to Washington.

I'm assuming the big 3 shrink over time regardless, but this will inflict a long drawn out period of suffering to the industry.

Toyota seems to be the company with the most to lose. They were building up capacity to take the place of GM, but they aren't quitting fast enough.