Automakers Get Loans, Want Bailout Too
Wall Street isn’t alone in looking for a bailout; the Wall Street Journal reported today that even after getting $25 billion in low-interest federal loans to upgrade their plants so they can make more fuel-efficient cars (President Bush signed the loan-granting bill into law Tuesday as part of a much bigger spending bill), the Detroit Three automakers are hoping for more assistance.
More to the point, both the automakers and their financing arms are seeking help. They’re afraid that without government help getting bad loans and leases off their books, the current credit squeeze will substantially hurt their ability to sell cars. Right now, the automakers and their financing companies are being very stringent on who gets a loan, and they’re asking for large down payments for new cars. The drop in available credit has allowed fewer consumers to get into cars, so fewer cars are moving off dealer lots. In turn, that hurts dealers by reducing their margins as cars stay on lots longer, which in turn hurts the automakers. It’s a vicious cycle, as evidenced by September’s abysmal sales reports. Automakers are hoping they’ll get relief in this $700 billion bailout.