House Passes Auto Industry Bailout; Oil Prices Continue to Drop
On Wednesday evening, the U.S. House of Representatives passed a $14 billion government rescue bailout for the automobile industry.
[social_buttons]This plan would provide emergency loans to General Motors and Chrysler; however, Ford has stated it will not seek out federal loans. GM and Chrysler claim they will not be in business much longer without federal assistance. According to GM:
From plants to parks. From dealerships to driveways. From gas stations to grocery stores. What happens in the automotive industry affects each and every one of us. In fact, the collapse of the U.S.-based auto industry wouldn’t just impact the nearly 355,000 Americans directly employed by the Big Three. One out of every 10 people in America is employed in a service that is related to the U.S. auto industry. If a plant closes, so does its suppliers, the local stores, the hot dog vendors, and the local restaurants.
The House passed the American auto industry bailout bill largely along party lines. The final vote was 237 to 170, with 32 Republicans from auto industry states joining 205 Democrats in supporting the rescue package. Senate Republicans have the power to kill the measure, and the White House has failed to gain their support. In an effort to compromise with Republicans, House Democrats agreed to drop a provision in the auto industry bailout that would have forced the automakers to end their lawsuits challenging state emissions standards, such as in California.
Many people feel the American auto industry has created their own “30 years of slow suicide”, as a White House official called it, and they should be allowed to die. The Big Three has had their chance to develop alternative car technologies and increase fuel efficiencies. As Nick Chambers on Gas 2.0 explains:
In other words, Detroit missed the boat and made a fatal strategic calculation that people would continue to buy larger and larger cars without nary a second thought. Does that mean we shouldn’t bail them out at all? Maybe so, maybe not… I’m still not convinced we shouldn’t save the big three in some form.
Now that gas prices have dropped significantly to 55 cents a gallon less than last month and $1.312 less than last year, maybe Americans will start buying big trucks and SUVs again.
The price of crude oil did rise today to $43.52, a ten percent increase caused by rumors of Saudi production cuts, but that was not significant enough to raise the national average of $1.683 per gallon.
Is there even a need for an auto industry bailout with low oil prices? Even though gas prices are lower, the pain from the pump is not easily forgotten. Gas prices would need to continue to drop or remain low for several years before Americans would consider buying large vehicles during an economic recession.
Having grown up in the Midwest, I would hate to see American car companies completely go under. I also don’t feel like they should be given any bailouts that allow them to continue to produce inefficient gas guzzling cars, no matter what the price of oil.
The auto industry rescue bailout does include a March 31, 2009 deadline for the automakers to produce long-term viability plans, which includes research and development on new technologies.
I would like to see more of an emphasis placed on increasing fuel efficiency and development of alternative fuel vehicles in a timely manner in any bailout package.