Importance of The Big Three
SGeneral Motors, Ford and Chrysler weren't labelled the Big Three just because they produced the most vehicles in North America. As giant employers, they had big influence, energizing entire economies with their big union wages and benefits packages. As giant manufacturers, they created style. Status was instantly signalled by black Lincolns and pink Corvettes. Seatbelts, reduced vehicle emissions and electric cars had to wait until the carmakers were good and ready. As giant political contributors, they had big power. The L.A. Times recently calculated that since 1990, the auto industry as a whole has donated $100 million US to Republicans and $34 million to Democrats.
This would explain why, on Thursday, US President Barack Obama stated that:
SWe are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented (whoops) the automobile cannot walk away from it.
Collapse of The Big Three
GM, Sthe nation's biggest domestic automaker said Thursday it lost $30.9 billion for the full year and expects to state in its upcoming annual report whether its auditors believe the company remains a going concern."
SGM's loss for 2008 was the deepest among Detroit-based carmakers. Ford lost $14.6bn, while Chrysler, controlled by private equity firm Cerberus Capital Management, fell $8bn into the red.
SThe automakers were promised a total of $17.4 billion in direct loans from Washington and they had to present restructuring plans by Feb. 17, 2009, if they wanted a second installment. While Ford opted out of the process, saying it doesn't need a loan just yet, the plans GM and Chrysler came up with are costly.
SGM said it would need up to $30 billion from the U.S. Treasury Department to continue operating. GM has already received $13.4 billion of the money, but the other $16.6 billion would be new. Chrysler wants $2 billion on top of the $4 billion it has already received and the $3 billion it is expecting from Washington.
Profits for The Oil Industry
In 2008, five of the relatively smallest Oil and Gas Companies in the world; Exxon Mobil, Royal Dutch Shell, BP, Chevron, and ConocoPhillips reported record profits of over $123 billion.
So just one year"s worth of profits for the oil industry is approximately three times what the auto industry is asking for in their bailout package. If these five companies bailed out the US auto manufacturers, they would still be able to report billions in profit.
Exxon Mobil's staggering $40.6 billion earnings for 2007 Sbeat its own one-year-old record for the biggest corporate profits ever by 3 percent. Put together with the announcement by the No. 2 U.S. oil company, Chevron, of an $18.7 billion year, up 9 percent over 2006, plus the earlier results of Shell and ConocoPhillips, and that's more than $100 billion in profits from four companies.
And just last month, Exxon Mobil reported the largest annual profit in U.S. history, Smaking $45.22 billion on the back of record oil prices The company reported total revenue in 2008 of over $477 billion, giving the company a profit margin of about 9%.
Auto Sector Bailout
That gives us a pretty good idea of what type of numbers we are dealing with, so here is my question: Since the oil industry is making record profits and the auto sector is on the verge of bankruptcy, shouldn"t the oil industry, instead of the US citizen, bailout the auto sector, especially considering how interconnected their business models happen to be?
The End of Suburbia: Oil Depletion and The Collapse of The American Dream (1:17:37)
Who Killed the Electric Car? (1:32:27)
Keep in mind that if you apply the Iraq war multiplier to the bailouts, then all bets are off. Just wanted to through that out there.
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