Bailing Out A Failed Auto Industry Will Only Delay The Invitable

The leaders of a failed automotive industry head to Washington to convince Congress that it deserves $50 Billion to save the same industry they drove into the ground

First of all, the approved bailout by Congress does not extend to the auto industry and no money from that should be used for them.

Second, if any money is approved through another act of Congress, there needs to be serious protections put into place, not like the first bailout which is leaving everyone wondering where the first $300 billion went.

Third, if any money is approved, there needs to be hard line goals that must be met within specific time frames. These goals if not met will have to have dire consequences. Along with that the whole sum should not be give at once, it should be given as needed and based on progression of those goals.

Fourth, an entity needs to be put into place to specifically monitor the progress being made.

Lastly, if money is to be given to them there must be a stronger recourse for the people. As others suggested for the banking industry, a voting option for the government based on the stock purchased as part of any bailout.

Personally I do not think we should bail them out. Yes jobs will be lost, but ultimately, someone will buy them out. This is not the same as the Banks where their collapse will collapse every other industry. This is a homegrown failure that stems from lower quality vehicles and not keeping up with technology. This is their own fault and they saw it coming, unless of course they are complete idiots. They saw the bailout of the banks and said let’s capitalize on this. If this were truly sole fault of the economic crisis, then how come the Japanese and European automakers are not in the same boat? Yes the economy has some to do with it, but not the major factor. What will $50 billion really do. Delay the inevitable is all.

The chiefs of the “Big Three” US automakers travel to Congress Tuesday to plead with lawmakers to save their talismanic American industry, despite fading hopes for a quick congressional bailout.The chairmen and CEOs of General Motors, Ford and Chrysler will testify to the Senate Banking, Housing and Urban Affairs Committee as Democrats mount a long-odds bid to pass a 25-billion-dollar rescue package.

Their testimony, to be followed by an appearance before a House of Representatives panel Wednesday, comes with millions of jobs threatened as the industry’s crippling losses are exacerbated by the deepening economic crisis .


Ford CEO Alan Mulally, Chrysler boss Robert Nardelli and Richard Wagoner of General Motors will testify to the committee, under the chairmanship of Democrat Chris Dodd who has already cast doubt a bailout can pass this week.

On Monday, Democratic Senate leaders in Congress opened a “lame duck” session vowing to fight for a new loan program for the auto industry.

Senior party members condemned the reluctance of the White House and Republican leaders to siphon off the money from a 700-billion-dollar finance industry bailout which has already been approved.


Senate Majority leader Harry Reid hit out at Treasury Secretary Henry Paulson for refusing to adapt the huge bailout to aid the auto industry, saying: “All it would take is one stroke of a pen and that problem would be solved.

“We are seeing a potential meltdown in the auto industry, with consequences that could directly impact millions of American workers and cause further devastation to our economy.”

On Monday, Senators Reid and Robert Byrd unveiled their 100-billion-dollar economic recovery package that includes the 25 billion dollars for the auto industry, sourced from the 700-billion-dollar bailout.

The Reid/Byrd Economic Recovery Act of 2008 “requires a long-term financial plan from the companies and has robust provisions for oversight, taxpayer protection, and executive compensation,” a Democratic Party statement said.


But the White House got in a preemptive strike before lawmakers reported for work, saying the special rescue funds for banks were not the answer, calling on Congress to adapt an existing 25-billion-dollar auto industry loan program.

“The administration does not want US automakers to fail, and in fact we support assistance to automakers,” Bush’s press secretary Dana Perino said.

But “we believe this assistance should come from the program created by Congress that was specifically designed to assist the automakers — from the 25-billion-dollar Department of Energy loan program,” she added.

“This is the appropriate funding to use for automakers rather than seeking an additional 25 billion dollars from the TARP program” — the Troubled Asset Relief Program, as the bailout is known.


Democratic leaders would need at least 10 Republican votes to pass the bailout in the Senate and overcome the minority’s obstruction tactics with a 60-seat filibuster-proof majority.

Perino pointed out that any attempt to reopen the TARP program would not make it through the Senate, and said the White House was working with Senate Republican minority leader Mitch McConnell on the issue.

Underscoring Detroit’s desperation, Ford announced Tuesday it would sell a 20-percent stake in its Japanese partner Mazda Motor Corp to raise 540 million dollars in much-needed cash.

“This agreement allows Ford to raise capital that will help fund our product-led transformation, and at the same time, allows Ford and Mazda to continue our successful strategic relationship in the best interest of both companies,” Ford’s Mulally said.


Automakers have warned that millions of jobs depend on quick federal aid to the manufacturers of iconic brands including Buick, Cadillac, Chevrolet and Jeep, and have taken out web and newspaper ads warning of the dire consequences of the industry’s demise.

Wagoner has warned GM needs an infusion of cash in the coming weeks to prevent a devastating bankruptcy at the nation’s largest automaker and cannot wait until president-elect Barack Obama — who has promised to bail out the sector — is sworn in on January 20.

Alan Mulally of Ford:

 Ford Motor Company chief executive Alan Mulally defended his company Tuesday against charges that Ford caused its own problems and said bailing out Detroit was essential to the U.S. economic recovery.

Ford CEO Alan Mulally says Tuesday the auto industry "is just absolutely essential" to the economy. 

Ford CEO Alan Mulally says Tuesday the auto industry “is just absolutely essential” to the economy.

Hours before Mulally and other heads of the Big Three automakers were scheduled to testify before the Senate Committee on Housing, Banking and Urban Affairs, Mulally appeared on CNN’s “American Morning” to discuss his expected testimony.

Mulally told CNN’s John Roberts that Ford took time to develop an electric hybrid car because its top priority was making the internal combustion engine more efficient. He also defended the company’s advertising blitz for the F-150 pickup truck and said the company had been working on improving its fuel efficiency long before there was talk of bailing out Ford, General Motors and Chrysler.

John Roberts: Why should taxpayers give you any of their hard-earned money?

Alan Mulally: Well, I think the compelling argument is that the automobile industry is just absolutely essential to the United States’ economy. We are in an economic situation now, with the credit crisis and the financial and the banking issues, that we really, more than ever, the automobile industry needs to be part of the solution. And the only thing that we’re asking for is to set up a bridge loan mechanism so that if the economy continues to deteriorate in the near term, that we could access that so we could continue to invest in the products that people really do want and value and help be part of this economic recovery. Video Watch Mulally defend Ford’s call for a bailout »

Roberts: But you know what the critics are saying. Critics are saying that you fought efforts as an industry to increase fuel economy standards, you promoted SUVs and pickups as demand for foreign oil increased, and we’re beginning to run out of oil. They’re saying basically you failed to lead, and now you have your hand out saying, “Help us.”

Mulally: And for that we also recognized the cost it would take to do that, so the Congress built into that legislation a mechanism that we could borrow at the Treasury rate so we could fund the acceleration of these vehicles and bring them to the marketplace. That is going very well. We are applying for that today. I think the most important thing is that we continue as a country to work this as a partnership and clearly fuel efficiency, quality, safety are going to continue to be at the top of the customer’s decision list when they purchase a car. Video Watch what it could cost to let the Big Three crumble »

Roberts: At the same time, Mr. Mulally, the people who will be asking you questions this afternoon are looking for some guarantees. Chris Dodd is the chairman of the committee that you’ll be sitting before. Here’s what he said in terms of wanting some guarantees from the industry: “Clearly, we shouldn’t be writing checks without some clear conditionality of what’s going to happen with that industry, if they’re going to change and get back on their feet again.” Can you guarantee to the American people that if you get that money, if the American taxpayers throw you a lifeline, you will change, you’ll become more efficient, you’ll produce cars that people want to buy, you’ll increase fuel efficiency, you will, indeed, move into the future? Video Watch why Congress wants to hear from Mulally »

Mulally: Absolutely. I don’t think it’s a promise. I think it’s a promise that we are already delivering on today. When you look at the Ford lineup going forward, we have now cars, small, medium, and large cars, utilities, and trucks that are absolutely world class in their quality, in their fuel mileage, in their safety — on par and competing and in many cases much better than Toyota and Honda. We have a business plan.

Roberts: One of the cars you’ll be introducing in 2009 is the Ford Fusion hybrid, and you are very excited about that, but it’s being introduced 12 years after Toyota introduced the Prius. Why did it take so long?

Mulally: Well, that’s really one model of the vehicles. The very first hybrid was introduced by Ford with the Escape.

Roberts: It was an SUV.

Mulally: Absolutely, but we have been there on the fuel efficiency from day one, and it’s been part of Bill Ford’s original vision of sustainability and energy efficiency and being better environmentally concerned.

Roberts: Here’s a question I have this morning. I think a lot of people are asking this same question as well. You are betting that because the price of gasoline is now down to an average of about $2.06 a gallon nationwide that that will rekindle interest in your Ford F-150 pickup truck line, and I know that you are trying to improve the fuel efficiency — I think the latest model is 15 [mpg] city, 21 miles to the gallon on the highway. Some people are thinking, “Oh my God, the price of gas is going down, and now you just want to repeat the mistakes of the past all over again.” Your thoughts on the Big Three bailout

Mulally: That’s absolutely incorrect because our plan is to have a full portfolio of small, medium, and larger vehicles that our consumers really want, and clearly the 150 that you have described has been the industry leader in the United States for 34 years, and the consumers love and need that vehicle. They absolutely love the 150. We are complementing that now, just like you mentioned, with small- and medium-size cars and utilities, all of which will be best in class on fuel efficiency. So we want to be there with a full portfolio that the consumers really do want.

Roberts: General Motors has got an electric car coming out. It’s not going to come out until 2010, 2011. Does Ford have a fully plug-in hybrid vehicle coming? Video Watch how despite woes at home GM hopes to expand abroad »

Mulally: We are working on that also, but let me just share with you the Ford plan about that. Our No. 1 priority is to improve the internal combustion engine, and that’s why the turbocharging, the direct fuel injection, we get a 20 percent improvement in fuel mileage and a 15 percent reduction in CO2, but we get that across all of the engines, across all the vehicles. Then we move to more electrification with the hybrids as you mentioned, and we are very excited that the next step after that will be full electrification. Now we’re tied into the grids, and we really have moved to an energy independence solution.

Congress stalls out:

Detroit’s Big Three automakers pleaded with Congress on Tuesday for a $25 billion lifeline to save their once-proud companies from collapse, warning of broader peril for the national economy as well.

“Our industry … needs a bridge to span the financial chasm that has opened up before us,” General Motors CEO Rick Wagoner told the Senate Banking Committee in prepared testimony. He blamed the industry’s predicament not on failures by management but on the deepening global financial crisis.

But the new rescue plan appeared stalled on Capitol Hill, opposed by Republicans and the Bush administration who don’t want to dip into the Treasury Department’s $700 billion financial bailout program to come up with the $25 billion.

Sympathy for the industry was sparse.

Banking Committee Chairman Christopher Dodd, D-Conn., told Wagoner and leaders of Ford and Chrysler that the industry was “seeking treatment for wounds that were largely self-inflicted.”

Still, he said, “Hundreds of thousands would lose their jobs” if the companies were allowed to collapse.

Sen. Mike Enzi, R-Wyo., complained that the larger financial crisis “is not the only reason why the domestic auto industry is in trouble.”

He cited “inefficient production” and “costly labor agreements” that put the U.S. automakers at a disadvantage with foreign companies.

Wagoner said that despite some public perceptions that General Motors was not keeping pace with the times and technological changes, “We’ve moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around.”

“What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II.”

Failure of the auto industry “would be catastrophic,” he said, resulting in three million jobs lost within the first year and “economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis.”

Congressional leaders worked behind the scenes in an effort to hammer out a compromise that could speed some aid to the automakers before year’s end. But the outlook seemed poor.

“My sense is that nothing’s going to happen this week,” Sen. Bob Corker, R-Tenn., said at the opening of the hearing.

Earlier, Majority Leader Steny Hoyer said Congress might have to return in December — rather than adjourning for the year this week, as expected — to push through an auto bailout.

“Dealing with the automobile crisis is a pressing need. We are talking about a lot of people … and a great consequence to our economy,” said Hoyer, D-Md.

The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year’s end without government aid.

In the Senate, Democrats discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to tide them over financially until President-elect Barack Obama takes office.

“There was no indication that there was any traction” for the White House plan, Sen. Ben Nelson of Nebraska said after a Democratic caucus luncheon.

House Speaker Nancy Pelosi, D-Calif., and other senior Democrats, who count environmental groups among their strongest supporters, have vehemently opposed that approach because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.

Instead, they want to draw the $25 billion directly from the $700 billion Wall Street bailout — bringing the government’s total aid to the car companies to $50 billion.

A Senate vote on that plan, which would also extend jobless benefits, could come as early as Thursday, but aides in both parties and lobbyists tracking the effort privately acknowledge it doesn’t have the support to advance. Treasury Secretary Henry Paulson renewed the administration’s opposition on Tuesday.

Even the car companies’ strongest supporters conceded Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape.

“While I believe we have to have retooling going into next year, if in the short run the only way we have to be able to get some immediate help is to take a portion of that, I would very reluctantly do that — but only because I believe President-elect Obama is going to be focused on retooling and on a manufacturing strategy next year,” said Sen. Debbie Stabenow, D-Mich.

The White House said the government shouldn’t send any more money to the struggling auto industry on top of the already-approved loans.

“We don’t think that taxpayers should be asked to throw money at a company that can’t prove that it has a long-term path for success,” said White House Press Secretary Dana Perino.

Sen. Mitch McConnell, R-Ky., the minority leader, said that redirecting the existing loans was “a sound way to go forward,” and that he was working with Democratic Leader Harry Reid of Nevada to set a vote on such a plan.

“The auto industry obviously is very important, very important to my state, but there is a way to do this,” said McConnell, who has two Ford plants and a GM plant in his state.

Paulson, testifying on the House side, defended the administration’s handling of the massive $700 billion bailout for the financial industry and said it should remain off-limits for Detroit, no matter how badly the automakers need help.

“There are other ways” to help them, he said.

At the same time, he testified, “I think it would be not a good thing, it would be something to be avoided, having one of the auto companies fail, particularly during this period of time.”

The industry mounted a feverish lobbying effort to secure funds they said were vital to their survival — and the health of the broader economy. In an e-mail marked “urgent” and sent to owners of GM vehicles, Troy A. Clarke, president of GM North America, pleaded with them to e-mail their representatives in the House and Senate in support of a “bridge loan” for the industry — and ask their friends and family to do the same.

“Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid,” Clarke said in the message.

That argument could be vital as bailout fatigue threatens to sap support for the carmaker aid.


3 Responses

  1. Hamlets, towns and cities — all across America — have Big Three dealerships. At each one a dozen or more people usually are employed. One in 10 American jobs is directly or indirectly related to the auto industry. So it is disturbing to

  2. The Dow Jones industrial average closed below 8,000 today for the first time since 2003 after poor economic news was compounded by the release of minutes from the Federal Reserve’s last meeting showing its leaders expect economic conditions

  3. NEW YORK (Associated Press) – Ford says it will offer employee pricing, zero percent financing and cash incentives on a variety of its vehicles. The Dearborn, Mich.-based company’s move comes amid a continued industry wide drop

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