This is today’s big news, and you’ve probbably heard about it already. This morning, President Bush approved three-year loan to GM and Chrysler which would give these companies $13.4 billion now and $4 billion in February. There are strings attached.
Although the loans have terms of three years, the government will require the companies to pay the balance back in full by March 31 if the corporate leaders cannot find a path to stability. The government will become part owners of the companies and will have oversight of executive decisions. The deal also requires that the automakers limit compensation and benefits, provide competitive wages, and eliminate the “jobs bank.”
The jobs bank allows union auto workers to still receive pay after being laid off, and even the Japanese, non-union automakers have a similar policy. The union has suspended the jobs bank already.
Do you think the automakers are making enough concessions in exchange for these loans? My concern is that even with this money, one of largest government interventions in a supposedly free market economy, the industry might not be salvageable.