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White House Considers Extending Bailout to Auto Industry

Deepening financial crisis among the nation's biggest auto makers prompted talks to allow corporations to apply for aid under the $700 billion bailout plan. Reporters and analysts weigh the controversy around the access to money for Detroit's Chrysler, G.M. and Ford.

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  • JEFFREY BROWN:

    As the federal government's financial rescue plan develops and expands, one of the nation's most important industries is now asking, "What about us?"

    Detroit's Big Three, hemorrhaging money for years, have seen conditions spiral downward quickly in recent weeks. And now General Motors is in merger talks with Chrysler, but says it needs federal help to complete a deal.

    We look at the situation with David Cole, chairman of the Center for Automotive Research, a not-for-profit institute in Ann Arbor, Mich., that studies the industry.

    And Peter Morici, an economist at the University of Maryland's School of Business, who writes frequently on the state of the auto industry.

    Well, David Cole, G.M. is the immediate focus right now. How serious are its problems? And how did they grow so quickly?

    DAVID COLE, Center for Automotive Research: I think it's really sort of a double-barrel shotgun blast to the gut that they've received as well as others in the industry.

    First of all, it was the rapid run-up in energy prices and the huge transition that we saw in the market in the spring and early summer. And, of course, since the meltdown on Wall Street, the credit crisis has really impacted, because it impacts the consumer buying cars, impacts the dealer with their floor planning, and it obviously impacts manufacturers and suppliers.

    And with the revenue shortfall that we've had in the last couple of months, this has been devastating on cash for the entire industry. G.M., Ford, and even the internationals are really under an enormous amount of pressure right now.

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