detroit bailout

Each month, the American Pulse Survey seeks respondents' opinions regarding various political, pop culture and economic issues. Seeing that the auto bailout is a hot topic these days, it is unsurprising that much of the latest survey centered on the $17.4 billion in so-called bridge loans to the Detroit 3 automakers. So, who's to blame for the Motor City's downfall? Survey says: bad management (78.8 percent), the UAW (63.8 percent) and global economic uncertainty (57.7 percent); so say 4,117 Americans.

Toyota doesn't want one of the Detroit 3 to fail. Despite the fact that the Japanese automaker is a direct competitor and seemingly stands to gain long-term sales from the collapse of at least one of its American competitors, the reality is that it would be a major headache for the entire industry. The largest issue may be that a Detroit collapse, especially of General Motors, would take a number of key suppliers down with it -- suppliers that Toyota relies upon just as much as any other automaker.

With all signs pointing to White House action on an automaker bailout despite the the bill not making it out of the Senate last Thursday, Canada has its taxpayers' wallets on standby as well. Our neighbors to the north account for a 20% share of the auto industry, and both the federal and Ontario governments are ready to add a commensurate amount of money to the bailout pot if U.S. government action does take place. So, assuming President Bush instructs Henry Paulson, the recently-crowned King of All Our Money, to give Detroit $14B out of TARP to tide them over and keep the RenCen escalators running until this all officially becomes Obama's problem next month, look for an additional $2.8B or so to come across the Detroit River. Thanks for the tip, BrandleSmith!

Although they're a big part of the Congressional pitch to get some federal funds, green cars aren't going to make the Detroit 3 profitable on their own any time soon. Take the Chevrolet Volt for example. When GM CEO Rick Wagoner testified that the Volt is being pushed into production for 2011, he added that, "It will not be at that point fully cost competitive." That statement might seem like the understatement of the century to some.

The choices are: spend $15 billion in bridge loans now to keep the Detroit Two (GM and Chrysler, since Ford can apparently hold its own) from going bankrupt, or spend $70 billion over the next two years to pay for the fallout from the Detroit Two going bankrupt. Those are the numbers according to the Anderson Economic Group and BKK, which get to their $70 million number based on 1.8 million job losses and evaporating federal and state tax revenue. And that number still doesn't include things like the jolts to credit markets, consumer confidence and manufacturing and supplier bases, among other nuclear scenarios. The question now is: how are the two (or three) automakers going to divvy up the $15 billion and just how many strings will Congress attach?

Remember the growing movement to caravan a few hundred of Detroit's most fuel efficient vehicles to the automaker's next meeting with Congress? Not happening. Interestingly, it wasn't for lack of support. In fact, it was just the opposite. So many people had voiced their support and announced their intentions to join in that the event's organizers just weren't able to keep up. Talk about a logistical nightmare.

CNBC is reporting that four U.S. senators have reached a bipartisan agreement on a bill to help the Big 3 automakers in Detroit. Those senators include Michigan Democrats Carl Levin and Debbie Stabenow, Ohio Republican George Voinovich and Missouri Republican Christopher Bond. Details of the bill are not yet available, but a news conference is scheduled for 2:30PM EST, at which time we should learn more. It will likely be some compromise between the Democrats' wish for taking an extra $25 billion out of the $700 billion financial bailout fund and the plan supported by the White House that would allow automakers to use the already approved $25 billion in low interest loans for anything they wanted rather than just investing in green technology.

General Motors' CEO, Rick Wagoner, who's been manning the helm for the last eight years and a part of its staff since 1977, has taken some heat for asking the Feds for a bailout. A possible condition for those funds may be the symbolic sacrificial death of its current leader, according to a slew of analysts polled by Bloomberg. Whether true of false, there seems to be a sense that the CEOs of U.S. automakers are some of "the dumbest people in the world," according to ex-Chrysler prez. Thomas Stallkamp. Ouch. Ford has stated that it doesn't need a bailout and Chrysler is actively looking for partners to keep itself alive.

When Congress wants to hand out money, it apparently wants to include everybody. Barney Frank, Chairman of the House Financial Services Committee, is likely to propose a measure that lets automakers tap into the $700 billion vein of rescue dollars that's ostensibly intended for financial institutions, yet is being hungrily eyed by everyone.