Struggling US automakers ask Washington for more help
AFP - Friday, November 7
WASHINGTON (AFP) - - Leaders of the struggling US auto industry were in Washington Thursday asking for even more help from the government as they battle to staunch the hemorrhaging of their balance sheets.
Congress recently authorized 25 billion dollars in loan guarantees to help US automakers develop more fuel efficient vehicles in order to meet upcoming regulations.
Ford, GM and Chrysler are now asking for another massive infusion of low-cost loans, but this time without any strings attached.
"It is essential that we preserve our manufacturing and technology base in this country," said Democratic House Speaker Nancy Pelosi in a statement.
"Today, the Democratic leadership discussed how to protect hundreds of thousands of workers and retirees, safeguard the interests of American taxpayers, and use cutting-edge technology to transform blue-collar jobs to green-collar jobs for generations to come."
She had told the Wall Street Journal Thursday she was open to providing additional assistance to the automakers as soon as next month, but insisted said the assistance should be tied to improving the competitiveness of the Detroit Three.
"I don't think you'll see much interest" in helping the industry, if aid goes toward "doing things the old way," Pelosi said.
Executives from General Motors, Ford Motor and Chrysler as well as the president of the United Auto Workers union also asked Pelosi to speed up the delivery of the loan guarantees during the meeting Thursday.
To press the case, the automakers planned to go over all the actions they've taken in the last two years to speed up the development of cleaner and more efficient vehicles," GM spokesman Greg Martin said.
"Right now, it all comes to a stop if they can't get help for the industry to get through this period," Martin told AFP.
The meeting came a day before GM and Ford were set to report significant third quarter losses and days after US auto sales sank to their lowest levels in 25 years.
The Detroit Three have already undertaken several massive restructuring programs in response to a steady loss of market share to Asian competitors.
That loss accelerated in recent years as high fuel prices shifted demand away from the gasoline-guzzling trucks and sport utility vehicles which had propped up their profits.
Then the credit crunch hit and auto sales plummeted as even consumers with good credit found it hard to get loans, as did the automakers whose credit ratings have fallen deeply into junk status amid bankruptcy fears.
General Motors has lost nearly 70 billion dollars from 2005 through the first half of this year while Ford's losses since 2006 topped 24 billion over the same period.
Chrysler is privately owned but like Ford and GM has been losing billions and laying off large chunks of its workforce.
The current cash burn poses a real threat to the survival of the automakers, said Dave Cole, chairman of the Center For Automotive Research.
"The likelihood of one or two of the Detroit Three manufacturers ending operations is very real," Cole said.
"To permit any of the Detroit Three manufacturers to collapse would scar the US economy further at a time when it can ill afford another blow."
Cole said a bailout would cost the government less than what it would spend on paying the unemployment benefits of the tens of thousands of workers who could lose their jobs.
"As policymakers consider their positions on assistance to the auto industry, they must decide, is an ounce of prevention indeed worth a pound of cure," Cole said.
But it's still unclear how much help the automakers will get and what form it will take, said Laurie Felax-Harbour of the Harbour-Felax Group.
"I expect they will do something," she said. "But everybody is wondering what the plan is going to be," she said.
It is likely that any bailout would kill a potential merger of GM and Chrysler, she said.
Both the UAW and the senior senator from Michigan have openly opposed the merger which could result in the loss of an estimated 30,000 to 35,000 jobs at Chrysler and an untold number at General Motors.
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