Friday, January 02, 2009

Helping Carmakers Is Not Enough

Apparently the notion of helping the big three car makers isn't enough, now the Treasury Department is looking at helping suppliers to the car industry.
The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry.

The Treasury’s guidelines, published yesterday, would let officials provide funds to any company they deem important to making or financing cars. That leaves room for the government to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC.

“There are going to be other industries that are going to have just as good a case,” as the auto companies, former St. Louis Federal Reserve Bank President William Poole said in an interview on Bloomberg Television. “We don’t know what those other industries are going to be. Where does this process stop?”

Shares of auto suppliers including American Axle & Manufacturing Holdings Inc. and Lear Corp. jumped yesterday after Treasury announced the guidelines. The Motor & Equipment Manufacturers Association has been lobbying for the use of federal funds as a backstop in case parts makers can’t collect money the auto manufacturers owe them.
I was under the impression that part of the reason for bailing out the Big Three (although Ford didn't take the money, to its credit), was that the impact of Chrysler or GM going out of business was that it impacted to great a segment of the economy, so better to keep them in business in order to keep these up and down stream companies in business. But apparently, even with the Chrysler and GM (along with GMAC) getting federal bailout loans, we have to pay the bill for bailing out the up and down stream companies as well?

Where does it end? I own a Pontiac (a GM car) which is paid off, do I get bailout help? After all, I am downstream of the car maker? But, something tells me that I won't get bailed out.

No comments: