Auto Parts Get $5 Billion Bailout: Where Does the Cycle End?

Posted March 20th, 2009 at 5.26pm in Enterprise and Free Markets.

In February, groups representing the auto parts suppliers asked for a $25.5 billion bailout from the Treasury. Yesterday, the Treasury announced parts suppliers will receive about one fifth of that through Troubled Asset Relief Funds:

The Treasury Department announced a $5 billion program to aid struggling auto-parts suppliers, raising the likelihood the government will extend more aid to General Motors Corp. and Chrysler LLC.

The assistance expands the government’s intervention in the auto industry, which was kicked off by Treasury’s $17.4 billion in loans granted to GM and Chrysler in December. But Treasury officials sought to tamp down expectations that other parts of the economy might also be eligible for aid.”

At the surface, it makes sense. Why bailout the automakers if you’re not going to bailout the parts suppliers? But this could be a vicious cycle. Is it the automakers’ turn to receive more money? According to many, yes:

For many observers, the government’s move solidified a sense that the administration would provide more aid to GM and Chrysler and avoid pushing the companies into bankruptcy. The administration plans to lay out its view on the companies’ viability by the end of the month.

This ‘clearly signals that bankruptcy is not an option for the auto makers,’ said Michigan Rep. Thaddeus McCotter, a Republican. ‘Why would you help the supply chain and not help the two auto makers?’”

There are more questions we can ask. Will the bailouts extend to other parts of the economy other than autos, homeowners and banks? A number of companies today could make the case that their respective industry is vital for the economy and begin requesting billions of dollars in bailout subsidies. Just as it has in the auto industry’s case, this could trickle down to suppliers to these companies. So the million dollar question (or billion or trillion) is: When will it end?

Author: Nick Loris
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6 Comments

March 20, 2009 Barb -mn writes:

It stops when the government is revealed to the majority of ALL people about the government’s role in all the financial crisis’ the government created!

ARRESTS NEED TO BE MADE!

March 21, 2009 Richard Morales writes:

Yes, Nick, they could but they won’t. Remember, the term “bail-out” is only one of numerous words than can describe the process of distributing funds for the purpose in question. Too bad we have to resort to the most pejorative ones, because they in turn tend to bias our view negatively. Rather, why not try to understand the process objectively? Probably because it’s easier to pepper it with our negativism rather than seek to understand it. Complex as they might be, the workings of the auto and banking industries are mostly understandable, with some effort, and the more we learn the more the administration’s approach makes sense.

March 22, 2009 Larry in Texas writes:

I’m sorry I just can’t let that comment from Richard go with out a confrontation. I can’t demand strongly enough for Pelosi, Schumer, Dodd,Reid,Leiberman and the rest of Liberal Capitol HILL to leave my tax dollars OUT OF THEIR lustful deleriams!!! I’m not in a position to allow some half term poser from Chicago, born in Kenya(AFRICA, who is payin’ his elite law cronies to cover up that fact),to be the puppet for them to lay all of their “affirmitive action” wasteful spending bills on! First and foremost- leave Wall Street alone!!! It’s a time proven fact that Liberal Democrats can’t run their own homes efficiently let alone a real life massive and complicated banking enterprise, insurance company or oil company! I know for a fact that ANY CFO worth the pay they are recieving WILL, without a doubt, find a way to make or recover money for the company that they are in charge of overseeing. It’s called Capitolism, or better yet “THE AMERICAN WAY” and it alone will be the cause and effect of the return of Wall Street to it’s rightful place at the top of the world!!!Socialism, as Pelosi(and insert ______any other Liberals’ name here) would have us live under, will slap all of the Liberals in the face when they all FINALLY realize that the money that they want to line their campaign contributors pockets with runs out when all of us “WORKERS” quit payin’ the TAXES they seek to give away to theives,motgage welchers, and drug addicts!I’m sorry, I thought all that WAS TRANSPARENT,like the man said it would BE!!!!!!!!!!

March 22, 2009 Sunday links - Maggie's Farm writes:

[...] now auto parts suppliers are getting bailout $. People are getting bailout fatigue. Dino [...]

March 22, 2009 Bill, FL writes:

I am a new car dealer so I have some skin in this game. I don’t believe the federal Government should bailout any industry (company). But now that the Fed has done this there is a major flaw in their program. They have done nothing to truely stimulate consumer demand. Restructuring and recapitalizing some car companies will not cause the consumer to come in and buy a car.
Let’s say GM survives and starts to retool to build the cars Congress says they should build…they are years and billions away from certifying any new models. That won’t help them now. The industry needs to sell about 14 to 15 million new vehicles to have an average year. If Congress had just offered a $5000.00 tax refund to anyone who bought a new vehicle from Jan 1, 2009 to June 30, 2009 that would have cost about $80 billion. This would actually help anyone in the market for a vehicle not just the unions. Damand would be stimulated for the vehicles that car companies can sell today. That jumpstart would get the industry rolling again and the cash flow would stabilze the manufacturers that are in trouble as well as their suppliers and dealers. One program could have helped the entire process from raw material to ultimate consumer. Why did they not do this…because consumers still want SUV’s and Light Trucks and people like Pelosi don’t want those vehicles sold. They want to control and retool these companies to build what a small minority of consumers are willing to drive.
Until demand is stimulted these companies and their suppliers will be a bottomless pit to throw our tax dollars into.

March 22, 2009 Obama Proving Reagan Right « Colorado Right writes:

[...] up in a few short sentences.If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”~Ronald [...]

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