Detroit Three Expect $25 Billion -- So Who Bails Out Americans' Missing Car Payments?
So, where's my bailout? For that matter, where's yours, too?
Anyone having trouble paying their mortgage is almost certainly late on their car or truck loans, too.
It used to be said that a house was the largest expenditure in any person's lifetime; but if someone buys five or more new cars over 40 or 50 years, depending on where they live, those purchases could easily cost more, in total, than their home.
The auto industry is a very powerful and significant part of the US economy and has been for many years; just last week, GM "celebrated" its 100th anniversary by displaying a "near-production version" of their Volt plug-in gas/electric hybrid (below; Steve Parker photo), slated for sale in 2011, maybe 2010. There's not one American alive who ever knew a US without an auto industry.
Import and domestic dealers, in total, have annual sales of about $480 billion from new cars and trucks alone, not counting used vehicle sales, whose totals are even higher. Annual car and truck sales in the US, new and used, amount to a near-trillion dollar business.
People in and out of the auto industry are asking that if millions of home mortgages can be purchased by the government, and which might be re-written to help the borrower, what about the tens of millions of outstanding car and truck loan contracts, many of which are going bad?
And while it can take several months, even a year, to foreclose on and repossess a house and property, missing or being late just three payments on a car loan will, in many cases, result in a repossession.
A vehicle repo often results in a person or family losing their only way to get to and from a job; that is, if they're still employed.
"Well, there's always the bus and train," say some, but in the America west of the Mississippi, useful mass-transit and public transportation are often hard-to-find alternatives to private cars and trucks.
From Denver south to Dallas then west to Phoenix and San Diego, then north to Los Angeles, San Francisco, Portland and Seattle, meaningful public transit, bus and rail, is lacking at best, non-existent at worst. (Porsche-supplied artwork shows a hybrid system concept for their new Panamera four-door; Click on any photo to view them in a larger format).
Industry newspaper Automotive News reports, in their September 23 edition, "
The American Financial Services Association is asking Congress to allow auto finance companies and other institutions to tap the $700 billion bailout fund designed for the troubled mortgage industry. The trade association, based in Washington, DC, also is proposing that automobile loans be classified as "troubled assets" along with home mortgages.
The car-loans question is separate from the $25 billion in government loans being sought by the auto industry to help retool plants to build fuel-efficient vehicles. Congress is considering up to $7.5 billion in funding to begin financing those loans, possibly as early as this week."
The group represents banks, securities firms and asset management companies, and says while they are not prejudging whether securitized auto loans should be in any bailout program, they do say the Treasury Department should have the option of buying and perhaps re-writing car loans as they may well do with home mortgages.
Compared to the $80 billion AIG bailout and the $700 billion bailout proposed for Wall Street, the $50 billion for the Detroit Three, promoted by Sen. Carl Levin (D-MI) to try and save a 100-year old American industry, seems like small change. Now that request has been whittled down to $25 billion, while the race is on by every industry and financial entity to be declared as having "troubled assets."
Other "troubled debt" officially includes (so far) student loans, home equity loans and credit cards.
For the 80 million Americans who did buy a new car or truck in the past five years, many still have at least two years left on their contracts. (Chrysler's cut-away artwork shows Dodge's "Hemi-Hybrid" Durango SUV).
The average price of a new car or truck in the US is now over $30,000. New car and truck loans are regularly written for 60 or even 72 months; gone forever are the 36 and 48 month contracts which many millions of Americans signed in the 1970s through the '90s. In addition to other financial pressures, many millions of Americans now find themselves trapped in car loans of six years, sometimes longer, while being charged high interest rates and getting squeezed by every creditor they may owe.
So far, Wall Streeters haven't been jumping out windows as they did during the First Depression in 1929, but it's easy to see why many home- and car-owners might choose that route out of their obligations. (GMC displayed this Denali hybrid concept at the 2008 Chicago Auto Show).
Many so-called consumer finance experts say people should pay their mortgage first, credit cards second and their car or truck loan third.
The reasoning? People are generally thought to have an easier time finding personal transportation than getting a credit card or home mortgage and that there are more options when buying a car or truck; used cars, a loan from family or friends or dealer financing are just three of those options, many think.
But that belief is just not realistic today, rooted in a time when car payments were not over $800 a month, a fairly typical amount on a lease or purchase contract written for a $40,000 car or truck.
The Detroit Three now say that for $25 billion, whether in loan guarantees (which is what saved Chrysler in 1979) or outright loans from the Fed, they will be able to convert factories made to build trucks to greener facilities making fuel efficient cars, do the research and development necessary to bring the latest and best technologies to Detroit and, ultimately, bring to market the kind of cars, crossovers and trucks which Americans want to buy.
That tired old argument from Detroit, that they built all those big trucks and SUVs for over 20 years was "because the buying public was demanding them," is now officially over. And I never believed that in the first place.
Americans, like European and Asian car-buyers have for 50 years, are finally demanding cleaner and more efficient cars and trucks, and are willing to pay a premium for them, just as long as there are tax incentives from the states and DC after they make their socially-conscious purchase.
Follow Steve Parker on Twitter: www.twitter.com/autojourno
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Then if they are given $50 billion dollars by the taxpayers, then we should get some kind of return on it, just like with the Banking/Wall Street bailout. Provisions for the taxpayers, or NO LOANS.
If we are going to nationalize it, we all should share in it.
Wait a minute! We are now giving low cost loans to the "BIG 3" automakers so they can retool to make more fuel efficient cars? Do you know why? Because they were more concerned to give their investors larger dividends than foot the bill with their money! This is just sick. Just because someone is a investor in a company DOES NOT guarantee you a profit. There is supposed to be some risk in the market, some people win and some loose. You are supposed to invest in a company that you think is going to do well and get your money out of ones that you think are going to sink. That is what drives innovation in the marketplace, it's called free market capitalism! I think that is what has been forgotten with these so called executives in the United States, it's taught in economics 101. That is why the European and Japanese automakers are spanking our a$$. They had the vision to look forward and see what was coming and made the investments required to produce the cars and trucks the buyers want, it's that simple. I guess most Americans are more concerned in short term gratification and are not concerned with the long term.
The U.S. automakers have been asleep at the wheel!
Capitlaist-Socalism is on the march! With the Government loaning money, in essence buying into companies, we the American people, will soon reap the rewards! We, the government, will own an interest in the Detroit Three along with a number of Wall Street financial institutions. The IRS won't be an agency collecting taxes but an agency distributing stock options to you and me. Joy! Joy! I'm breathing a little easier now aren't you?
Are you advocating assistance for millions of fools who bought luxury tanks that they can no longer afford to own or fill with gas?
For years- even before W.'s stint- the public, politicians and many corporations were all attached at the hip, spending way beyond their means, sashaying merrily toward a cliff. Now the entire motley crew has fallen off into the abyss of debt.
If distressed car, credit card and home equity loans are included as "troubled assets", then we, as a nation are terminally screwed. The money to bail out the entire nation will ruin our economy for decades to come. The dollar will crash and will take most asset classes with it- and interest rates will soar because foreign investors will demand a steep risk premium to buy our Treasury notes and bonds.
Unfortunately, this is just like any other national emergency. Every industry and affected interest group sends their lobbyists to congress to make sure that they get a piece of the dough being handed out.
The bickering going on and the compromises being made in order to craft a digestible piece of legislation will choke future generations. God help those kids out there who are going to have to pay for all of this.
This is awesome. The HuffPo is usually full of posts by people who want to protect unions at all costs. I'm with you 100% - no bailout for stupid auto makers.
The bailout for the American people already happened on October 17, 2005 when the new bankruptcy law went into effect.
um, that was NOT a bailout for the American people - it was a WINDFALL for credit card companies, who lobbied nonstop to get Bankruptcy rules made HARDER for people to declare Chapter 7 and wipe out their credit card debt. Get your facts straight, please.
Perhaps I should have tagged my comment as satire?
But, in truth, that was the ONLY bailout the American people will get from Congress.
Paulson, Bernanke, Bush want to make sure the Steve Parkers of the world continue to use "bailout" to describe their corporate welfare program. This is not about bailouts, but it is about corporate welfare. Anyone who thinks there's a place in our democracy for corporate welfare must be a Republican. If you're a Republican, you believe in corporate welfare. Now, please take your corporate welfare and leave. The dire scenario for not providing $1 trillion dollars for Bush's going away present to his cronies is to nationalize our country's resources, starting with the oil. Now, that's a bailout.
Wake up fellow Americans!
Remember what Kanye West said about how George Bush regards black people? Well, that's how Washington and Wall Street regard YOU! To them, we citizens are just a crop to be harvested or livestock to be milked. And, like crops, we're being force-fed for maximum yield. They tell us to buy, buy, buy, not because they want us to have a high quality of life, but because they need our money to pay for their villas in Italy!
Make no mistake: We The Great Unwashed are merely tolerated by the high and mighty, only because we provide them a regular infusion from our pocketbooks, whether it be from taxes or consumption of goods and services.
So, stop showing up at the barn twice a day, America! Become wise consumers and live within your means.
Get rid of your car note entirely. Buy only used, fuel-efficient, reliable vehicles you can afford to pay for in full, with cash. (And, if you don't have at least a couple thousand on hand, it should tell you something about your lifestyle.)
luziannagirl"
"Make no mistake: We The Great Unwashed are merely tolerated by the high and mighty, only because we provide them a regular infusion from our pocketbooks, whether it be from taxes or consumption of goods and services.
...(And, if you don't have at least a couple thousand on hand, it should tell you something about your lifestyle.)"
1. Speak for yourself re personal hygiene.
2. Taxes are necessary to pay for the proper functions of government.
3. Unless you grow all your own food (and make the necessary tools for that yourself) you will need to buy goods and services.
4. Not having at least $2000 on hand is not necessarily a symptom of an extravagant lifestyle.
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