Detroit May Get Stop-Gap Bailout
After pleading to Congress last week for almost $34 billion in aid instead of the $25 billion they originally asked for, Detroit automakers General Motors Corp., Ford Motor Company and Chrysler LLC may get some form of relief money after all. Congress is meeting today to put the final touches on a draft bill that would give the beleaguered automakers $15 billion to $17 billion in loans, CNNMoney.com reports.

According to the Financial Times, President-elect Barack Obama yesterday said his administration "would seek to restructure the vehicle industry by simulating the effects of Chapter 11 bankruptcy protection while providing government aid to keep it functioning." Obama went on to say the companies "did not have 'a sustainable business model right now.'"

The $15 billion loan lawmakers have indicated they may give the automakers is designed only "to keep them in business until the spring, when the Obama administration and the new Congress can craft a longer-term rescue plan," the New York Times (NYT) says.

However, the emergency loans do not come without strings.

Even with the Detroit automakers' promises to make drastic cuts to their operations along with the United Auto Workers pledging to make sacrifices, Congress is in talks about the creation of a "car czar" and an oversight committee in order for GM, Ford and Chrysler to receive a taxpayer-financed bailout.

The oversight board could be made up of five cabinet secretaries and the head of the Environmental Protection Agency (EPA) and led by an independent chairman or "car czar," says the NYT. The oversight entity would direct the drastic reorganization plans that the auto companies have said they were willing to undertake. The final legislation is also expected "to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding. One proposal would require the auto companies to seek government approval for any business transaction of $25 million or more."

Along with taxpayers' money, the emergency loan package would be supported by diverting about $7.5 billion from the Section 136 Energy Department loans to speed the production of fuel-efficient cars, the Politico reports. Analysts say a comprehensive bailout for GM, Ford and Chrysler could cost as much as $125 billion, which will be up to Obama's administration to work out.

For now, the Democrat-majority Senate could begin consideration of $15 billion bailout legislation within days. "But skeptical Republicans could kill such a measure with a procedural hurdle that would need 60 votes to clear," Reuters concludes.

Unemployment Claims Low, Job Losses High
In the week ending Nov. 29, the number of seasonally adjusted initial unemployment claims was 509,000, a decrease of 21,000 from the previous week's 530,000, the U.S. Department of Labor reports. Claims have dropped for two consecutive weeks after hitting a 16-year high of 543,000.

According to MarketWatch, economists expected claims to jump back up to 540,000 the end of November.

The four-week moving average of new claims — which smooths out distortions caused by one-time events — rose by 6,250 to 524,500, the highest in 16 years. The number of people continuing to collect unemployment benefits increased by 89,000 for the week ending Nov. 22 to 4.09 million, also the highest in 16 years. These two statistics combined indicate that jobs are becoming harder to find, MarketWatch says.

In November, the U.S. private sector slashed 250,000 jobs — the biggest job loss in seven years — according to the ADP national employment index (via MarketWatch). Job losses rose to 158,000 in the goods-producing sector and to 92,000 in the services.

Overall, 533,000 workers were laid off in November, 183,000 more than expected, totaling to 10.3 million Americans out of work, the UK Times reports the DOL as having said.

More Rate Cuts in EU and Asia
In an effort to combat the recession gripping the 15-nation eurozone, the European Central Bank's (ECB) Governing Council cut its key lending rate by three-quarters of a percentage point to 2.5 percent last week. According to MarketWatch, it is the largest cut in the ECB's 10-year history.

Along with the ECB, the Bank of England's Monetary Policy Committee also dropped its key lending rate by a full percentage point to 2 percent. "The economy is plunging deeper into recession despite emergency tax cuts and the multibillion-pound bank bailout," the Bank of England said Thursday (via the UK Times). This base rate is the lowest level in more than 50 years.

Following suit was Sweden's Riksbank, which delivered a larger-than-expected 1.75 percentage point cut in its repo rate, bringing it down to 2 percent, the Reserve Bank of New Zealand, which slashed its key lending rate by 1.5 percentage points to 5 percent. (Source: MarketWatch)

In Asia, India announced a $4 billion spending package and a full point rate cut this past weekend to revive growth, Reuters reports. Indonesia also cut its rate by a quarter point to 9.25 percent.

China Reorganizing To Challenge Boeing and Airbus
"China is reorganizing its aerospace sector again in a bid to increase competitiveness and raise its profile. This reflects national ambitions to develop a range of world-class indigenous products and to take on more challenging collaborative programs," according to Oxford Analytica (via Forbes).

In recent months, "China has created a giant new aircraft company to make jumbo jetliners in competition with Boeing and Airbus; it has merged the country's two largest aircraft makers into one company; it successfully tested its first domestic commercial jetliner; and it announced orders for the new aircraft from a unit of General Electric," says Seeking Alpha.

While Boeing and Airbus both continue to struggle with development delays of their next-generation products, China continues to make giant leaps as a potentially serious new competitor in aerospace and aviation.

"The future for China's general aviation and helicopter sector appears promising," Oxford Analytica continues. "The economy is still growing strongly, which should raise commercial flying. Business flying is likely to develop, as should activities such as search and rescue operations or in support of exploration and the extractive industries."

"The next few years will be an important period for China's aviation industry," Miao Wei, vice minister of industry and information technology, recently told the People's Daily (via China Daily).

British Airways in Merger Talks
British Airways is in merger talks with Australian airline Qantas that could create the world's first global airline, according to the UK Times. BA has also been discussing a merger with Iberia, the Spanish national carrier, and hopes to expand its alliance with American Airlines. The combination of the four would create the largest airline in the world, capable of carrying 198 million passengers a year.

The airlines are seeking partners to cut costs and attract more passengers after a difficult year of record fuel costs and currently declining passenger count due to slowing economies.