Category — Bankruptcy

US Congress passes 25 bln loan guarantees to automakers

The US Senate Saturday approved 25 billion dollars in loan guarantees for the financially strapped US auto industry, intended to spark a wave of automotive innovation.
The loan guarantees were included in a continuing resolution that included funding for the US government and the wars in Iraq and Afghanistan.
President George W. Bush has indicated that he intends to sign the bill.
“We’re very pleased Congress has chosen to act at this critical time,” said Greg Martin, director of communications for General Motors Corp’s Washington office.
GM had been subject of much speculation that it could be forced into bankruptcy.

Bankruptcy could be one of the better things to happen to the auto industry. It eradicates the union contracts, all the health plans, places the pensions in a holding company, giving the companies an opportunity to compete with the Asian and European companies.
If GM and Ford takes advantage of the opportunity to clean out the deadwood in upper and middle management, pick up the good workers from the workforce and hire new to fill in, they can be a force in manufacturing again.

The unions have to go, the adversarial work relations buried otherwise this doesn’t work. It becomes a bailout for the unions, nothing more.