Congress Quietly Passes a $25 Billion Bailout for the Auto Industry

Because of all the hoopla about the mortgage crisis, not many people noticed another $25 billion of your tax dollars going to the U.S. auto industry:

The House of Representatives on Wednesday approved a $25bn package of low-cost loans to help hard-pressed carmakers and their suppliers finance plant modernisation at a time of restricted access to public capital ­markets.

The automotive loans are separate from the proposed $700bn bail-out for the banking sector, which is still being debated in Congress. The House approved the measure 370-58, setting the stage for Senate approval within days.

The industry’s case has been helped by the fact that Michigan and Ohio, the two states most dependent on the car industry, are key swing states in the November 4 presidential election.

Executives of General Motors, Ford Motor and Chrysler and their suppliers have lobbied heavily for the loans. Both presidential ­candidates, John McCain and Barack Obama, have expressed support.

Shelly Lombard, analyst at Gimme Credit, a corporate bond research company, told clients this week that “blue collar workers are more sympathetic victims than ‘rich’ investment bankers. So it’s easier to defend loans designed to save close to 100,000 jobs in the shrinking US manufacturing industry.”

Those blue collar workers who are being protected by this legislation are also a big reason why the auto industry is in trouble. Union labor costs continue to climb making it more difficult for U.S. manufacturers to build cars at prices that are competitive with foreign carmakers. There have also been quality and reliability issues with U.S. cars, and car buyers want good value for their dollars. The U.S. auto industry isn't providing it.