Bailout Watch 531: U.S. Auto Suppliers Need $33.5 Billion to Stay Solvent. Or More.

Robert Farago
by Robert Farago

Don’t look at me. I already gave at the office. Gentlemen, I refer you to the $5 billion already allocated to prop up automotive suppliers attached to domestic car makers with an umbilical chord made of piano wire. OK, that particular area of the bailout buffet table is shrouded in red tape at the moment. But do the suppliers seriously expect Uncle Sam to stump-up some $8.3 billion per year for the next four years to help them keep the lights on? That’s how much cash they’ll need, according to a new study by A.T. Kearney. And Kearney’s boys reckon they’ll get it. “A disorderly wind-down of key suppliers could also potentially shut other OEMs,” A.T. Kearney partner, Dan Cheng, said in the PR release accompanying the tome. And he expects the government will do “everything it can” to help the industry. Ready for the kicker?

They’re low-balling. As Automotive News [sub] reports, the estimates are based on some decidedly optimistic thinking. “The Chicago-based consulting firm expects U.S. auto sales to rebound to more than 16 million vehicles by 2012 from pent-up consumer demand, though the firm expects 2009 sales to drop 24 percent to 10 million units.” Drop to? Aren’t we below that already?

Robert Farago
Robert Farago

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  • Old Guy Ben Old Guy Ben on May 14, 2009

    It seems to me, after there should never have been a single dollar "invested" by our government, they are at least trying to salvage something out of this mess. I'm not trying to justify it, just trying to say that it's possible we (the taxpayers) won't end up with nothing but debt. I don't think it's likely. I think this is all a ridiculous exercise so (fill in the blank) can say at the next election "Well, I tried to save some jobs" or some other bullshit. It's mostly futile. Sure we saw it years ago. Same as we did in the mortgage / hedge fund / banking sector. I contacted my legislators and said "hell no!" to any and all bailouts. As did a lot of people. Did they listen? $30 billion is peanuts compared to the total being wasted.

  • LoserBoy LoserBoy on May 14, 2009

    @Old Guy Ben: Your scare quotes around "invested" are appropriate. The government is committing the sunk-cost fallacy, also known as "throwing good money after bad." Sometimes, an investment can't pay off. On the topic of scare quotes, anytime I email my Representative or Senators about something, I "enjoy" the response. My Rep. at least has the courtesy to send a mostly on-topic form letter/email. Usually, I get it about a week after Congress has voted on whatever I spoke up about. My Senators give me a "your email has been received" acknowledgment, but that's all.

  • Old Guy Ben Old Guy Ben on May 14, 2009

    Okay, those are scare quotes - thanks. It sounds like we have the same representative. "Thank you for your concern." If I'm lucky.

  • KeithF KeithF on May 16, 2009

    I agree with the "two wrongs don't make the auto bailout right" POV, but in any case it is worth pointing out that several of the major TARP banks have attempted to give back the money and have been rejected by Geithner. Yes that's right. In contrast to the auto company "loans", most if not all of the TARP money is gonna get paid back whenever Obama decides he is done making the banks his bitch. This means the relative size of the numbers doesn't matter compared to the auto bailout numbers. For the record, I was against the bank bailouts too.

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