Detroit Fearing No US Bailout, Looks Overseas

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GM (GM) has plants in Mexico. Ford (F) has plants in Wales, Germany, Turkey, and Spain. Chrysler has facilities in Canada. Almost all of their suppliers source and build key parts in countries around the world.

Most of the headlines about a shutdown of the US car companies focuses on the three million jobs which could be lost in the US and the hit to the tax base. Lost in the analysis is what happens overseas.

That may be an opportunity to find bailout money if Congress is loath to act.

According to FT,  Sweden’s government is considering loaning Volvo and Saab as much as $248 million. The companies are owned by GM and Ford.

The move on the part of Sweden raises the possibility that the money the US auto companies need does not all have to come from the US. If The Big Three were smart, they would be knocking on the doors of sovereign governments which stand to see their economies lose large numbers of jobs. Unemployment costs are expensive and raise the need for more taxes. People out of work hurt GDP as much in Spain as in the US.

American car companies are looking for $25 billion. Sweden seemed prepared to put up 1% of that. Pressed, it might put up more. In nations such as Mexico, the number of jobs at stake is greater. The same is true for many of the EU nations.

Detroit’s blackmail is that if The Big Three close down, the ripple effect on the US economy would push the recession much, much deeper. That is not a situation which is unique to America. Detroit’s troubles belongs to the world.

Perhaps the checks to save the US car industry will not all come from Washington. Those private jets don’t have to be used to fly to meetings with Congress. They could be assigned to a round-the-world trip, barnstorming for dollars (or Krona).

Douglas A. McIntyre