Saturday, December 20, 2008

Auto Makers Bailout Approved

President Bush announced a plan to pump $13.4 billion into the auto makers by mid January. This plan gives the car companies a few months to get their house in order but certainly does not correct all of their problems. The money is going to GM and Chrysler and it gives them until March 31 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers.
More money can be made available if Congress releases the other $350 billion of the treasury departments financial rescue plan.

This plan to bail out the automakers sets "target" rather then firm requirements about what needs to be done.

President Bush was afraid that letting the auto makers fail "could send our suffering economy into a deeper and longer recession." He also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office." Both of these gestures are accurate and seem sincere.

President Elect Obama praised Bush for this action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."

The other part of this puzzle I don't hear many talking about is the toll the economic crisis is having on the car companies. From things that I am reading people are going into the show rooms but a large percentage are unable to obtain financing to purchase a car. Couple this with an economy where a large percentage of people are out of work and a large group that potentially will be out of work in the near future and you can see why car companies are struggling. Time might help (I think it will). Combine this time, with making hard choices, as President Obama has said,

“I do want to emphasize to the Big Three automakers and their executives that the American people’s patience is running out, and that they should seize on this opportunity over the next several weeks and months to come up with a plan that is sustainable. And that means that they’re going to have to make some hard choices.”

These hard choices should lead to more efficient companies and hopefully coinside with an improved economy will allow these companies to prosper. Well lets hope so at least.

Good Luck and Good Currency Trading.



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