General Motors Corp., seeking a federal bailout as its cash dwindles, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.
A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said today in an interview. He prepared the estimate for Bloomberg News.
The projected expense of $100 billion to $200 billion covers funds for existing programs, such as unemployment insurance, and new measures that would be needed to revive economic growth after millions of auto-related job losses.
Such a sum would be an eightfold increase over the $25 billion bailout package that will be debated in Congress next week to help prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC amid the industry's worst sales year since 1991.
GM said last week it may run short of operating cash by year's end, and projected it would be ``significantly short'' of what it needs by June unless the auto market improves or it adds capital.
A GM shutdown would cost jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent due to the weakened economy, Behravesh said.
Collapse Versus Bailout
The cost of an industry rescue plan versus the risk of a GM failure is a central issue for U.S. lawmakers. While some investors including Wilbur Ross say a GM bankruptcy would be a ``real mess'' that would end in liquidation, others such as hedge-fund manager William Ackman say there is no need for taxpayer funds and that GM should reorganize in court.
``A bankruptcy wouldn't address our immediate liquidity concerns,'' said Renee Rashid-Merem, a GM spokeswoman. ``It's not an option for GM because it creates more problems than it solves.''
The Center for Automotive Research projects that federal, state and local governments would lose $108.1 billion in taxes over three years in the event of a 50 percent reduction in U.S. automaker operations.
Job losses would total 2.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing, the Ann Arbor, Michigan-based group said in a report on Nov. 4, three days before GM disclosed its cash drain.
`Real Costs'
``The government has real costs it would have to foot'' in a liquidation, said Bob Brusca, president of Fact & Opinion Economics in New York and a former chief of international markets at the New York Federal Reserve.
``They don't get those income taxes any more from the workers, they don't get the taxes from the corporation, they don't get local loss of taxes,'' Brusca said in an interview.
States pay an average of $279 a week for unemployment benefits for 26 weeks, according to Jennifer Kaplan, a U.S. Labor Department economist. The payments can last as long as 39 weeks in some states including Ohio, where the jobless rate was 7.2 percent in September.
The federal government also might ``be on the hook for the pension benefits and health benefits'' for workers thrown out of their jobs in an automaker collapse, said Dana Johnson, chief economist with Comerica Inc. in Dallas.
GM climbed 6 cents to $3.01 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have tumbled 88 percent this year.
To contact the reporters on this story: Alex Ortolani in Southfield, Michigan, at [email protected] or Mike Ramsey in Southfield, Michigan, at [email protected]
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad09qxbiElB8&refer=home
Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
Triangle Bar said:Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
Mike, dare I say it, you sound like Obama and the left. "We'll bail you out if you do what we want." Okay fine, in this bailout are you also going to fund the infrastructure of setting up a natural gas filling station on every corner through out America?
I don't want to pay anymore PERIOD, ff. What do you want to do?fff said:You want to pay now or pay later?
kolanuraven said:Why has someone not asked Exxon or the other oil companies to bail out the auto industry?
They've got the $$$$$$$$$$$$$$.................it would be to their best interest................??????????????????????????
Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
TSR said:Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
Drawback to natural gas besides companies like Exxon Mobil is its danger during an accident I would think.
TSR said:Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
Drawback to natural gas besides companies like Exxon Mobil is its danger during an accident I would think.
Mike said:TSR said:Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
Drawback to natural gas besides companies like Exxon Mobil is its danger during an accident I would think.
It is being used today and no......... it's not more dangerous.
Mike said:TSR said:Mike said:I would be for a bailout if they would run the UAW out of town, and be given the mandate to build every vehicle to either run off natural gas or be battery operated.
It is a relatively simple task to run vehicles from natural gas. All that needs to changed is the tank and fuel delivery system. The Gas Company here in Alabama (Alagasco) has been using it for years in all the service vehicles with great results and................ we have plenty!
Drawback to natural gas besides companies like Exxon Mobil is its danger during an accident I would think.
It is being used today and no......... it's not more dangerous.