Detroit asks Congress for $50 billion

Detroit’s auto makers are hurting. Falling sales, higher gas prices, and consumers moving away from large SUVs and pick-ups has meant hard times for the country’s auto giants.  All this comes as the auto makers are trying to satisfy the consumer’s need for fuel-efficient, eco-friendly cars. The pleas for the new technology and increased efficiency aren’t just coming from niche environmental groups, the demand now comes from every sector of transportation as rising gas prices contribute to a hurting economy.

The push for new technology does not pair well with low sales and to make up for the difference, the Detroit manufacturers are starting an aggressive lobbying campaign asking Congress for $50 billion to modernize plants and help them build the fuel-efficient vehicles the market is demanding. Last year, Congress gave the auto makers $25 billion as part of an energy bill, to help them develop hybrid and electric technologies. Now, as Detroit surveys the need and magnitude of their situation, they have expanded that ask to $50 billion in low interest loans spread out over three years.

The money would be used to retool existing plants to enable hybrids to be built in more places, thus increasing the supply of hybrids in the market. The costs of doing this are so large that the loans from Congress would only cover 30% of these costs.

Critics call this a government bailout of a failing industry and claim that it won’t help increase technology availability at all.  The industry counters by saying that it will keep working men and women in their jobs and designing advanced hybrid and electric technologies to reduce our dependence on oil.

While it is true that the public is crying out for better transportation technology, it’s not necessarily true that we need the Big Three to do it. Their financial woes may be the perfect opportunity for a new company to fill the gap and take hybrid technology into the future.

What do you think? Should Congress pitch in or not? This isn’t even close to $700 billion yet. Even so, with the House rejecting the original Wall Street bail out bill, shares of auto makers fell to record lows on 9/29/08. GM hit a 54 year low ($8.51), Ford was down over 13%, and Diamler down 10%.  Even the hybrid leader, Toyota saw a one day decline of nearly 8%. So, what did Warren Buffet do during all the turmoil? He bought shares of BYD Company…a hybrid electric car battery manufacturer. Go figure, Mr. Contrarian.