Could the US car industry be next to be bailed-out

Posted by admin on 13 November, 2008 under Business news | Be the First to Comment

How far will World Governments go to save their economies and industry when we see the US Democratic Party working on a $25 billion (£17 billion) car industry rescue plan.

The democratic party are discussing a rescue plan for US car-makers at a time when US Treasury Secretary Henry Paulson is re-thinking his $700 billion (£476 billion) bank bail-out plan. Mr Paulson has said that instead of buying up the banks’ toxic mortgage debts, the US Treasury will instead focus on taking stakes in banks, which is similar to the route taken by the UK government’s rescue package.

Car-makers Ford (Sales down 30%, $2.98 billion third-quarter loss), General Motors (Sales down by 45%, $4.2 billion third-quarter loss, plus 5,400 job cuts) and Chrysler (Sales down by 35%) are companies that have seen huge falls in sales over recent months amid the credit crisis. These falls in sales have prompted this plan with a vote to be made as early as next week on a bill to introduce the rescue.

Pressure has come from many directions, one of which being the union leaders, warning of the dire consequences for the US economy if one of the big three car manufacturers goes broke.

So where will these rescues end? With both the banking and insurance sectors already having benefited from rescue deals and now the car industry presently being considered. All of this renders the whole “capital market” system obsolete and it makes a mockery of the “Free Market” system.