Automakers Getting More Government Aid

All three major surviving U.S. automakers are getting new economic aid either from Washington or the state of Michigan. Chrysler is expected to seek $10 billion in loans from the federal government’s Department Of Energy. Although the company is run by Fiat, the company has ruled out any financial investments in the automaker, only providing technical or management aid. A new $150 million dollar engine plant to build Fiat designed engines is planned for the near future.
On Tuesday, Chrysler, GM and Ford all received big tax breaks from the state of Michigan to improve their chances of economic survival as GM and Chrysler struggle back towards profitability with smaller more streamlined companies. Ford has so far been able to manage well without federal bailouts, however has sought tax help from Michigan state while receiving help from Washington over the years by being a major military contractor through the use of subsidiary divisions. One contract, for example brought in $159 million for a Ford subsidiary to develop a new generation of antiaircraft gun. On average, the U.S. government spends $1.98 million dollars every 5 seconds on either military contracts or defense costs.

But, the government loans are hardly charity for the automakers by any means. On the contrary, they are big money making investments for Washington were Chrysler is currently paying back these loans with interest rates that range between 7.2% and 14.3% on the 5.7 billion dollars that Chrysler still owes the Treasury Department. GM is hoping to finance itself with a new public stock offering(IPO), and doesn’t plan to seek any additional help from Washington ahead of this IPO because it could possibly be bad public relations.

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