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Obama to Bush: We Need an Auto Industry Bailout Now

Posted: Nov 11, 2008 10:59 a.m.

An indication of how serious the auto industry's troubles are: when the current leader of the free world and the next leader of the free world met for the first time, their topic of discussion, apparently, was what to do about Detroit's troubles. 

The New York Times reports, "The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President Bush in a meeting at the White House to support immediate emergency aid."  Bush apparently indicated that he might be receptive to the request, as part of a political trade.  The Times notes, "Mr. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Mr. Bush has long fought, people familiar with the discussion said."  That may mean no deal is imminent.  "Democrats also indicate that neither Mr. Obama nor Congressional leaders are inclined to concede the Colombia pact to Mr. Bush, and may decide to wait until Mr. Obama assumes power on Jan. 20."

As the discussions took place, the Detroit Free Press reports, "Wall Street cast an alarming vote on the future of General Motors Corp., driving the company's shares to their lowest value since 1949."  Deutsche Bank analyst Rod Lache, an influential voice over investors in the auto industry, revised his evaluation of GM's value -- saying GM stock is not worth $0.  "Even if GM is able to secure immediate U.S. government support, we believe that GM's predicament has the potential to set in motion a sequence of events that would be bankruptcy-like," he wrote in a note explaining the decision.  Other analysts have made similar, if not quite as drastic, evaluations in recent days.

General Motors on Friday said it might run out of cash before the end of 2008.  With tens of millions in payments to suppliers due in January, that development would mean certain bankruptcy.

Reuters notes, The Bush administration has not dismissed outright the possibility of extending emergency assistance to the automakers. But public and private statements from administration officials indicated more clearly on Monday that they believe any new and substantial money for manufacturers would require legislative action."

That may happen.  Bloomberg reports, "Democratic Senator Carl Levin of Michigan said in an interview that if the Treasury Department can't be persuaded to act under existing law then Congress may include automaker assistance as part of economic stimulus session during a so-called lame-duck session later this month."

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