Posts Tagged ‘auto bailout’

Certainly most of us would agree that the thought of bailing out the auto industry is a bit controversial, right?  After all, if they can’t stand on their own two feet, then why should we pay the price?  Quite frankly, I have mixed feelings on this one.  I wonder when enough is enough.  When will the government stop bailing out private business, and what is it that I’m just not getting?  On the surface, at least to me, it seems simple.  These companies are private businesses.  If they don’t have and can’t put together a sustainable business plan, then, hey, let ‘em sink.

Unfortunately, it isn’t so simple.  Imagine for a moment that the Big Three go under.  It could mean huge impacts on an economy already in trouble.   And it trickles down to auto dealers and other in auto-related businesses.  It means the loss of jobs in communities that are already hit hard and perhaps even trouble getting parts for that Dodge Dakota that you just bought a year ago.   So once again, it’s not so cut-and-dried.

So while it’s difficult to say exactly what the auto bailout might mean to us as consumers, we know that it does mean:

• Preservation of jobs. The significant loss of jobs resulting from any of the Big Three going under at this point would further hurt the economy.

• Support of current products. Those of us who own a vehicle from any one of these three manufacturers will likely need support for our product.  We need the dealerships, the parts suppliers, etc., to maintain our vehicles.

While these might not seem like significant reasons to bail out three very large companies, it’s the timing of it all that makes it so important.  A failure of these companies now would drive the already-harsh economic conditions into a much steeper decline.  Most of us would agree, I think, that further substantial hits to the economy need to be avoided if they can be.

As the Big Three carmakers prepare to make like Winnie the Pooh and help themselves to a generous helping from the bailout honey pot, luxury electric sports carmaker Tesla Motor announced that if it doesn’t get a $350 million U.S. government loan, it will delay the launch of its Model S four-door sedan.

Tesla’s government loan would come from the $25 billion pot created by Congress in September to encourage carmakers to develop clean car technology. Lawmakers are poised to siphon off $15 billion of that money just to help Chrysler and GM make it through the year.

The Tesla loan would help develop an all-electric car with a $57,499 price tag (federal tax credits will reduce the price to $49,999) and a range of 250 miles on a single charge. Without the loan, Tesla says it won’t open a $250 million manufacturing plant in San Jose; instead, it will just wait for the financial crisis to play itself out.

If the Big Three carmakers can get $15 billion, why not loan Tesla $350 million? The technology seems more promising than what we’ve seen come out of Detroit for decades.

Speaking of electric vehicles, the Big Island has Big Plans to build a network of electric vehicle charging stations in the state of Hawaii ⎯ an estimated 70,000 to 120,000 charging stations by 2012. Hawaii is perfectly positioned to lead the charge on electric vehicle travel, thanks to a small landmass where most trips are short ones. Plentiful wind, wave and solar energy can supply all the renewable energy their electric grid can handle.

Which government loan has more merit ⎯ the $15 billion loan to experienced carmakers who have resisted making hybrids or electric cars for decades, or a $350 million loan to upstart Tesla, a company that’s placing its faith in a new and untried technology to make a vehicle that many middle-class Americans could never afford?