Now for car-parts bailout (more money thrown down the Detroit rat hole)

The Wall Street Journal ^ | March 25, 2009 | Paul Ingrassia

[St. Louis Conservative]

In for a dime, in for a dollar, as they say. Or for a fender, a halogen headlight or a fully reclining leather-covered heated seat.

This is clearly a stopgap measure. Task force members understand that trying to save GM and Chrysler (so far, Ford laudably has declined government aid) will be fruitless without propping up the companies that make components -- often for both the foreign auto makers with factories in America as well as for the Detroit companies themselves. As an executive at a Japanese car company put it privately: "Our position is that we just want the suppliers to get paid." The $5 billion of loan guarantees for suppliers who ship parts to GM and Chrysler will help assure that -- at least for a while.

The bigger issue, though, is that parts suppliers are limping along with just half the revenue they were getting two years ago. It won't help much to guarantee payment on parts that aren't getting ordered. Which explains that while auto-parts executives rejoiced last week when they learned the task force was about to make an announcement, they were underwhelmed when they actually saw it. The parts suppliers had asked for $25 billion, including $15 billion of direct assistance.

But the components companies can't all be saved. At some point the weaker suppliers are going to have to fold their hands. "The worst thing is . . . if we all collapse at once," one supplier executive told me last week. "The second worse thing is . . . if we all continue limping along like zombies. Rationalization has to happen." The statement neatly summarizes the conundrums -- indeed, the inherent contradictions -- in the mission of Mr. Obama's task force.

[GeronL]

no more bailouts.

sell cars or go out of business.

the parts makers should get paid for the parts they sell, by the buyer not taxpayers

[ken21]

the swedes don’t want to put money into saab.

so, how is it that a socialist country knows better than we do?

the bank and auto bailouts are a mistake; the obama administration will use them to increase government control.

[Vince Ferrer]

I would think much of the car parts industry can survive on just keeping our current cars running.

[Don W]

I read your post, and had an instant flash to CUBA!

That makes me think: How many of our fellow FReeper’s Hondas etc. COULD be still viable after 50 years of homemade parts? Put a 289’s intake and carb on my car, and it’s still viable...

[Sir Francis Dashwood]

I would think much of the car parts industry can survive on just keeping our current cars running.

There is an interesting issue with that... a lot of them, in conjunction with some auto manufacturers, have agreed to change the parts available so they can force people into buying new models...

Many manufacturers have also lobbied legislative bodies to pass laws that restrict salvage sales. I saw a perfectly good BMW e30 body shell and frame, the engine was toast... but the salvage yard said they could not by law sell it as one piece, that it had to be cut up into pieces first. (I just wanted the body for a race car, most of the rest of it was junk.)