Detroit's Auto Giants Beg For A Bailout
Tuesday, November 18, 2008SUSIE GHARIB: A dire warning today from Detroit's big three auto makers. The CEOs of General Motors, Ford and Chrysler told a Senate Banking Committee that their companies will collapse and hundreds of thousands of people will lose their jobs unless the auto makers get an emergency loan. They're asking for $25 billion. But on Capitol Hill, many lawmakers didn't buy into that hard sell. Washington bureau chief Darren Gersh joins me now with the latest. Hi Darren.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi Susie, actually those executives are still testifying and Bob Nardelli, the CEO of Chrysler started off with an urgent request. He's telling Congress he's not sure his company can make it to next year if Congress doesn't offer help this week. The news from Chrysler CEO Bob Nardelli was worse than had been expected. As a private company, Chrysler is not required to report information, so it was a surprise to learn the company is paying out $4 to $5 billion a month for salaries and other operating expenses. On top of that, Nardelli said the company owes parts suppliers $7 to $8 billion-- money it doesn't seem to have.
ROBERT NARDELLI, CEO, CHRYSLER LLC: Therefore, without an immediate bridge financing support, Chrysler's liquidity could fall below the level necessary to sustain operations.
GERSH: GM CEO Rick Wagoner warned if any of the big three fail, it will touch off a domino of bankruptcies across parts suppliers.
RICK WAGONER, CEO, GENERAL MOTORS: This is all about a lot more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse.
GERSH: But critics like Alabama Senator Richard Shelby worried assistance to the auto industry would just perpetuate a market failure.
SEN. RICHARD SHELBY, (R) ALABAMA: A lot of people think you've already failed.
GERSH: Now even industry supporters are worried about that. House Speaker Nancy Pelosi said if the auto makers do get government money, they will have to deliver a plan by March to prove they will be able to stay in business Susie.
GHARIB: Darren, you know there used to be the saying that they say what's good for General Motors is good for the country. Are there enough people who still believe that?
GERSH: Not really, Susie, not any more. I think if the country weren't in a serious economic crisis, a lot of people would say that one of these companies should just be let go. But there's no question that lawmakers are worried about the impact on working families, on the overall economy. So the auto makers are certainly making the case that what is good for them is also good for the country.
GHARIB: Whether GM or any of these auto makers are dead or alive, it's still going to cost us, whether we're talking about lost tax revenues or higher unemployment costs, isn't that right Darren?
GERSH: I wish I had good news but I don't. I mean that's obviously the case. Already we're going to see the sales tax hit from lower auto sales, unemployment, just go on down the list. So there will be a big economic hit and even if these companies get money, they're going to have to bring down their production substantially which means factory closings, things like that.
GHARIB: You're absolutely right. So what happens next?
GERSH: They're going to try tomorrow to have a test vote, but as one senator put it, this is the beginning of a very long loan application process.
GHARIB: It sure is. OK, thanks a lot, Darren, appreciate it, Washington bureau chief Darren Gersh.
