Detroit on the Brink! What exactly does Detroit want?

This is the hottest talk across the globe, a $15bn bailout package for Detroit top three automakers, I was wondering why people are making so much noise for just $15bn (I also started talking like big guys as if $15bn is nothing for me:-)?

When govt can provide $25bn to citi or $100bn or more to AIG what makes govt to think so much for just $15bn bailout package for these automakers? The biggest problem here is that govt is proposing $15bn which will not be enough for them to survive even for 1 more year. So, sooner or later they are going to file for bankruptcy, the concern here is that one out of every seven people in US are doing job in auto industry, so in case if big three falls, it will create flood in the jobless market which is already suffering now!!!

• The potential bailout of the Detroit auto makers is about economics. The Detroit Three are asking for $6-billion in loans and lines of credit, but that's unofficial, because the auto companies have yet to disclose details about what they want and what plans they have for Ontario's assembly plants.


• There's a growing sense of frustration in the Ontario government about this lack of transparency. The $28-billion broader auto sector in Ontario provides one of every seven jobs, which means it has to be sustained.


• Some have argued that the best thing to do is to allow the creative forces of destruction to play themselves out. "But from the perspective of somebody who loses their job, there's no creativity, it's all destruction."


• The ‘Big Three’ US car makers — Ford, General Motors and Chrysler — appearance before the Congress was something of public relations disaster, but it looks as though they are well on their way to $15 billion in emergency loans.


• They want $34 billion but one industry analyst suggested to the US Congress that the total they may require could reach $125 billion.


• The political stakes in the US in not coming to the rescue of the automakers makes all but a done deal. Nevertheless, it is inescapable that Detroit has lagged behind in product innovation, particularly in producing energy efficient vehicles, productivity and simply producing a vehicle that consumers want to buy.


• Irrespective of the size of rescue package, significant layoffs and further plant closures lie ahead. With both of its rivals in a weak position, Ford looks the best placed to emerge from the crisis. It underwent a radical restructuring two years ago and has placed considerable emphasis on quality. Yet the fate of the Big Three is largely intertwined given their shared parts supply and dealer networks.


• Japanese automakers have been surprisingly quiet given that they make up to 40 per cent of the US auto market. They have been quick to understand that a failure in Detroit could severely affect the overall market ripping through their own supply chains.

Unless Detroit is able to reinvent its business model they look set to continue their erosion of the Big Three’s US market share. With the prevailing economic climate in the US, the Congress is in no position to throw good money after bad. To what extent Detroit can collectively rescue itself will be tested in the month’s ahead.

- Abhishek Sonu, Associate, HBJ Capital