US Auto Industry and the Bailout.

>> Friday, December 12, 2008

The Article appeared in Associated Press this Sunday.

“Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

"It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy."

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent the weakened U.S. auto industry from collapsing.

But the deal fails to happen.

Yesterday The Bush administration’s $14 billion automaker bailout plan and other alternatives lack the votes to pass the Senate, as lawmakers seek to beat a deadline to keep General Motors Corp. and Chrysler LLC from collapsing.

GM and Chrysler are in a race against the clock as they need federal aid to keep from running out of cash early next year. Pressure is mounting on GM as a small number of parts makers ask for payments in advance, people familiar with the matter said.

Effect -

Yesterday US markets tumbled. Asia opened weak and went down drastically. But Indian markets out perform the other Asian Markets.

Europe has opened weak, with GM stock opening at a 50% lower price than the last trade.

First it was believed that the effect would be short lived but the effect won’t get over fast as the conditions so prevail.

Video –

Martin Feldstein opposes the automaker bailout.

Video: Harvard economist Martin Feldstein says a managed bankruptcy is preferable to the current bailout proposal.