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Heads Of Big Three Automakers Plead For Aid
CIA Stock Photo, Inc.
There’s been a lot of political posturing about the Big Three North American auto manufacturers recently, and a lot of misinformation.
Cynical grandstanding and clever theatrics by politicians on both sides of the border have come to be expected, but misinformation about the industry, its successes, challenges and importance to the economy can be damaging.
The fact is we cannot afford to lose these companies because of short-sighted politicians, who themselves know full well we must preserve the industry in Ontario or suffer dire consequences across the country. What’s more, the Detroit Three are not asking for a “bailout,” as so often is said, but simple loan guarantees in a tough credit market.
“The current situation can only be resolved with solid, clear, accountable business plans from the automakers and their stakeholders,” Industry Minister Tony Clement said after meeting with executives of Ford, Chrysler and General Motors in Detroit, and top officials in Washington about a bailout.
“The North American automakers were restructuring before the current economic situation, and what the global financial situation has done is accelerate their need for a new business model,” he said.
“On both sides of the border, recognizing that we do indeed have an integrated market for this industry, the companies and the unions need to come up with a plan for the industry’s long-term success.”
With two of Detroit’s Big Three automakers teetering on the brink of collapse, congressional leaders yesterday refused to advance a proposal for a federal bailout, saying auto industry executives had failed to persuade lawmakers that they would make good use of the money.
Instead, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) ordered General Motors, Chrysler and Ford to submit detailed proposals by Dec. 2 explaining how an emergency infusion of government cash could put them on a path to financial health.
“It is all about accountability and viability,” Pelosi said at a news conference with Reid and other House and Senate leaders. “Until they show us the plan, we cannot show them the money.”
As hope for a bailout evaporates, GM has few other options for raising money. It is unable to sell off assets, such as its Hummer division, because potential buyers are hesitant to expand during an economic downturn. And Wall Street isn’t interested in investing in the troubled domestic auto industry.
It’s not clear where cash for the automakers would come from. Democrats had proposed carving $25 billion out of the Treasury rescue program, but the White House opposes that idea, saying the money is needed to stabilize the banking system. Administration officials favor modifying an existing $25 billion low-interest loan program aimed at helping the automakers retool their factories and build more fuel-efficient vehicles. But Pelosi has ruled that out, saying the loan program should be used for its original purpose.
Whatever the source of the cash, Sen. Christopher J. Dodd (D-Conn.), who will chair the hearings in the Senate, said $25 billion should be the upper limit when automakers rework their requests.
Dodd said he also wants to explore the idea of a bankruptcy in which the companies work out agreements to restructure with suppliers, lenders and labor, potentially supported by government help.
Bennett, who is close to Senate GOP leaders, said many Republican lawmakers also want a clear explanation of “why bankruptcy isn’t an option.”
Bob Corker (R-Tenn.), a member of the Senate Banking Committee, said auto executives “hurt themselves tremendously this week.”
UPDATE: November 22, 2008 06:22 am
Congressional leaders agreed to give Detroit automakers more time to make their case for a $25 billion emergency bailout, but they demanded that General Motors, Ford and Chrysler provide detailed plans for using the money.
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., agreed to call Congress back into session next month to revisit the bailout.
“The sad reality is that no one has come up with a plan that can pass the House and the Senate and get signed by President Bush,” Reid said.
As for the auto bailout, during two days of testimony this week, the chief executives of GM, Ford and Chrysler, along with the head of the United Auto Workers, failed to convince lawmakers the companies were becoming more cost-efficient and competitive.
They also did not allay fears that the proposed $25 billion in emergency loans would be just the first of many government payments needed to keep the Big Three afloat.
The crisis that is gripping Ontario’s automotive cities requires “urgent” action to save hundreds of thousands of jobs across the province, a meeting of municipal leaders heard this morning.
Officials from 22 Ontario cities meeting here pledged unified action to lobby the federal and provincial governments for aid to the industry which employs one in six Ontarians.
“There is no time to wait. We have to move now to save jobs in the automotive industry, we need to fight for this,” London Mayor Ann Marie DeCicco-Best said during a break at the meeting of leaders from Ontario’s automotive cities.
“We have to be loud and if we do not do this now, it will be too late.”
The mayors also agreed any action that needs to be taken must be co-ordinated with the aid package now under negotiation with the U.S. federal government, she added.
“America’s plan will be to protect their jobs. If we do not have a plan, what happens to our jobs?,” said DeCicco-Best.
“If the automakers go into bankruptcy, it will be catastrophic.” Said PeterWhite, chief executive of the London Economic Development Corp.
