Microsoft billionaire founder Bill Gates wondered on Wednesday why the US government was considering a bailout for the Big Three US automakers when no private investor was willing to foot the bill.
“After all, they have to say ‘if no one else is willing to invest, why is that?’ Gates told CNN on the eve of congressional hearings on restructuring plans and requests by Chrysler, Ford and GM for a combined US$34 billion in government bridge loans to avert a collapse of the sector.
“What is it that investors are seeing about this business model or cost structure that makes them unwilling, and why, in that case, is the government alone stepping forward in this way?” Gates said.
“When you don’t have any private investors you really have to say, is taxpayer money going to have the desired effect?” Gates suggested the government look closely at the Detroit automakers’ restructuring plans.
“There are very few industries that aren’t going to suffer this [economic] downturn ... How does government take its finite resources and decide how much restructuring or change is expected there?” Gates asked. “And ideally you look at the sign of private investment as part of how you say, ‘OK, that really is a good investment class.’”
Reinforcing Gates’ view of the US auto industry, ratings agency Moody’s announced on Wednesday it had lowered its debt rating on Chrysler and GM to “CA” from “CAA2,” saying “the rating outlook is negative” for both companies.
The agency maintained its rating for Ford.
On US president-elect Barack Obama’s economic challenge when he takes office in January, Gates said he would recommend a far-reaching stimulus program as a first step.
“Clearly we need a stimulus that doesn’t undermine the incentive for businesses to be careful about their spending and making those correct investments,” Gates said.
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