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The Big Three Creep Closer to an Auto Bailout

Written By Brian Hicks

Posted December 8, 2008



road trip


After making the long road trip from Detroit to D.C., it now looks as though it was worth the ride this time for the CEO’s of the Big Three.

According to Barney Frank, Congress and the Bush administration are negotiating the final details of a $15 billion measure to rescue domestic automakers without forcing the ouster of their chief executives.

Passage of the plan, however, is less certain and Senator Richard Shelby has hinted at a filibuster.

“This is a bridge loan to nowhere,” Senator Shelby, senior Republican on the banking committee, said on “Fox News Sunday.” “This is a down payment on many billions to come.”

So at this point the battle moves on to its next stage.

In the meantime, the underlying problem in the auto industry remains as pervasive as ever. Consumers aren’t buying any cars and it doesn’t matter the make or the model.

From Reuters by Nichola Groom entitled: From hybrids to SUV’s, unsold cars pile up

“From pricey luxury sedans to popular hybrid cars, automobiles made overseas are stacking up at ports and parking lots around the United States as supplies far outstrip demand amid the nation’s worst auto market in more than 25 years.

At the Long Beach port near Los Angeles, Toyota Motor Corp vehicles including Prius hybrids, FJ Cruiser sport utility vehicles and Lexus IS 250 luxury sedans are being stored on a vast construction site that will one day be a new container terminal.

The site became a gigantic parking lot when Toyota and Daimler AG’s Mercedes-Benz asked the port for space to store thousands of vehicles that dealerships have not been able to take on due to sluggish sales.

“It’s unusual that they would be here longer than a few days, but that’s the situation now,” said Art Wong, a spokesman for the Port of Long Beach. “They can’t move it through their pipeline fast enough so they are asking for additional space while they keep their vehicles here more than a few days, and in some cases more than a few weeks.”

The port has not counted how many additional cars were being stored, but Wong said Toyota has leased an additional 23 acres of space while Mercedes-Benz has leased about 20 more acres.

Global automakers have been sideswiped by the collapsing demand for new cars and trucks. A market slowdown that began in the United States has spread to Europe and Asia.

Toyota spokesman Mike Goss said inventory had been pushed to “unacceptably high” levels that would take 80 to 90 days of sales to clear.

That is still less than the 115-day supply of inventory on average for General Motors Corp, Ford Motor Co and Chrysler LLC, but it is double Toyota’s inventory levels of just a year earlier.”

Bailout or not, I doubt there will be that much celebrating on the car ride home.

Of course, cash in hand they just might splurge for some airline tickets. And after the beating they just took I can’t say that I would blame them.

Once you get out of college road trips aren’t as much fun as they used to be.

Neither for that matter is waking up after long binge.