When is enough enough? For several years, the U.S. Treasury has been printing bills at a frantic pace to pay for the wars in Iraq and Afghanistan. Then the printing press was used once more to bail out Wall Street companies, banks and insurance companies that were on the brink of going belly up.
Now, waiting in line is the automobile industry. Even as we speak the Bush administration is examining a range of options for providing emergency financial help to spur a merger between General Motors and Chrysler.
The White House is exploring the option to provide financial assistance to the deeply troubled Big Three Detroit automakers, possibly by using the Treasury Department’s wide-ranging authority under the $700 billion bailout program recently approved by the U.S. Congress.
A bailout for carmakers would be the latest in a series of government-financed rescue efforts for banks, Wall Street firms and an insurance conglomerate. While few experts dispute the car industry’s troubles, rescuing them would also increase political pressure to help ailing industries like airlines and steel producers.
Both G.M. and Chrysler are in desperate need of cash to stave off possible bankruptcy filings. G.M., the nation’s largest automaker, lost $18.8 billion in the first six months of the year, and is burning through more than $1 billion in cash each month. The company had $21 billion in cash as of June, but is rapidly depleting its reserves to offset declining revenues. Analysts said that at its current cash-burn rate, G.M. would fall below its minimum operating requirements by sometime next year.
The failure of General Motors, the Ford Motor Company or Chrysler would have broad consequences for the economy. The companies combined employ more than 200,000 people in the United States, and indirectly support jobs for millions more Americans through their suppliers and dealerships. If any of the three companies were to go bankrupt, it would probably leave behind huge liabilities for federal and state governments.
I understand many companies will be hit by the current financial tsunami in Wall Street, but the sixty thousand dollar question is; does the U.S. Treasury have unlimited funds to bail out all the companies that could go bankrupt? In my book, you can’t spend more than what you earn. It’s time for Mr. Bush to open his eyes and start adding his incomes and expenses. He doesn’t have much time.
Source: White House Explores Aid for Auto Deal – The New York Times