I'm impressed with the Obama Administration's willingness to face up to the problems posed by GM and Chrysler. I can see several trade "red flags" in these Wall Street Journal stories: U.S. Threatens Bankruptcy for GM, Chrysler; Detroit's Fate Sealed in West Wing.
Should U.S. taxpayers assist foreign companies:
All the same, the administration's new plan is sure to ignite a battle
over the government's role in the economy, what sacrifices will be
required of labor unions, and whether it makes sense for U.S. taxpayers
to assist a foreign company, Fiat, in an alliance with a U.S. company,
Chrysler.
Limits on foreign investment:
As part of their proposed pact, Fiat and Chrysler agreed over the
weekend to scale down the Italian auto maker's initial stake in
Chrysler to 20% as a condition of the Treasury Department's bailout.
Fiat earlier this year struck an agreement to take a 35% stake in
Chrysler initially, and up to an additional 20% at a later date.
Although another story (Chrysler Plan Trims Fiat's Stake, Cuts Out Cerberus) explains that this is only a limit on the initial investment:
If Fiat and Chrysler reach a definitive deal within 30 days, the
Treasury would be willing to invest $6 billion in Chrysler. Fiat
wouldn't be allowed to raise its stake beyond 49% until after the $6
billion is repaid, people with knowledge of the matter said.
Originally, Fiat had the option to increase its stake to as much as 55%.
How will these proposed tax benefits treat foreign vehicles:
It also plans to... support a
congressional bid to offer large tax incentives for new-car purchases,
with money for the program coming out of the $787 billion stimulus
package. Mr. Obama also said that the Internal Revenue Service was
creating a new tax benefit for car buyers.
Domestic production requires for Fiat/Chrysler:
A much harder decision was what to do with Chrysler. A conclusion that
the company wasn't viable could lead to 40,000 workers losing their
jobs. To combat that threat, the government is negotiating with
Chrysler and Italian car maker Fiat SpA for an agreement that Fiat will
continue to make cars in the U.S. if it buys Chrysler, according to an
official of the Obama administration.
The general issue of subsidies:
The auto plan came packaged with several new government initiatives
whose price tags remain unclear. The government said it would guarantee
the warranties for all new GM and Chrysler cars until the two companies
return to health. It also plans to speed up government fleet purchases...
I hope this plan works, but for some reason I'm not too optimistic
Ned Stevens
Frisco Auto Repair
Posted by: Ned Stevens | October 11, 2009 at 07:31 PM
I have to say that the Obama administration is working hard on a better and cleaner car business.
Posted by: Autobanden | November 02, 2009 at 10:01 AM
I'm an optimists... I'm believing some of this action sends the US back in the right direction.
Posted by: Eddie | November 22, 2009 at 09:14 AM