Wednesday
Nov192008
Big three automakers bid for bailout
Representatives from the flailing Big Three automakers appeared before the Senate Banking, Housing and Urban Affairs Committee Tuesday to make their case for receiving a 25 billion dollar bailout.
Alan Mulally, president and CEO of the Ford Motor Company; Robert Nardelli, chairman and CEO of Chrysler LLC, and Richard Wagoner Jr., chairman and CEO of General Motors explained that if they were to fail, there would be millions of lost jobs across the entire spectrum of the automobile industry, from those in manufacturing positions to those who work in dealerships.
While the committee members’ opinions about the bailout were mixed, the sense of cautious doubt seemed unanimous.
“Let me say what I have said previously: I support efforts to assist the industry. Not because their leaders necessarily deserve taxpayer’s help. On the contrary, they deserve no more help than do the leaders of the financial companies that created the subprime mortgage mess that has exploded into a global financial crisis,” said Chairman Chris Dodd (D-Conn.)
Dodd asserted that the blame for the Big Three’s dilemma rested on the CEO’s themselves.
“None of us relishes being here today to consider these prospects. That goes for our company and labor witnesses. Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact that they are seeking treatment for wounds that I believe are to a large extent self-inflected,” said Dodd.
However, the Big Three disagreed that they should be held responsible, with the Ford and GM CEOs saying that their companies were headed towards profits until the credit crisis hit. The result was that the consumers ability to buy cars was severely impacted and gains quickly dropped.
The automakers also rejected the notion that they have not been innovative and have been refusing to make needed changes. All three companies have begun the creation of hybrid vehicles and have made attempts to reach more effective labor costs.
The CEOs flatly disagreed with suggestions that they declare Chapter 11, citing that there would be no real benefit since the restructuring that would come with a bankruptcy declaration was already being attempted. This would be coupled with the companies supposed inability to maintain liquidity on remaining products, since they contended that few consumers would purchase a product from a folding company. Mulally also stated that Ford still owed wages to workers that would be lost if the company declared Chapter 11.
An additional witness, Peter Morici; economist and professor at the University of Maryland School of Business, disagreed and said that Chapter 11 was a viable option.
“If Chapter 11 is put off, the successors to GM, Ford and Chrysler that emerge from a bankruptcy reorganization process will be smaller and support fewer jobs than if these companies endure this difficult transition in 2009. More jobs can be saved among GM, Ford and Chrysler and their suppliers if bankruptcy reorganization is endured now than in the future.”
Alan Mulally, president and CEO of the Ford Motor Company; Robert Nardelli, chairman and CEO of Chrysler LLC, and Richard Wagoner Jr., chairman and CEO of General Motors explained that if they were to fail, there would be millions of lost jobs across the entire spectrum of the automobile industry, from those in manufacturing positions to those who work in dealerships.
While the committee members’ opinions about the bailout were mixed, the sense of cautious doubt seemed unanimous.
“Let me say what I have said previously: I support efforts to assist the industry. Not because their leaders necessarily deserve taxpayer’s help. On the contrary, they deserve no more help than do the leaders of the financial companies that created the subprime mortgage mess that has exploded into a global financial crisis,” said Chairman Chris Dodd (D-Conn.)
Dodd asserted that the blame for the Big Three’s dilemma rested on the CEO’s themselves.
“None of us relishes being here today to consider these prospects. That goes for our company and labor witnesses. Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact that they are seeking treatment for wounds that I believe are to a large extent self-inflected,” said Dodd.
However, the Big Three disagreed that they should be held responsible, with the Ford and GM CEOs saying that their companies were headed towards profits until the credit crisis hit. The result was that the consumers ability to buy cars was severely impacted and gains quickly dropped.
The automakers also rejected the notion that they have not been innovative and have been refusing to make needed changes. All three companies have begun the creation of hybrid vehicles and have made attempts to reach more effective labor costs.
The CEOs flatly disagreed with suggestions that they declare Chapter 11, citing that there would be no real benefit since the restructuring that would come with a bankruptcy declaration was already being attempted. This would be coupled with the companies supposed inability to maintain liquidity on remaining products, since they contended that few consumers would purchase a product from a folding company. Mulally also stated that Ford still owed wages to workers that would be lost if the company declared Chapter 11.
An additional witness, Peter Morici; economist and professor at the University of Maryland School of Business, disagreed and said that Chapter 11 was a viable option.
“If Chapter 11 is put off, the successors to GM, Ford and Chrysler that emerge from a bankruptcy reorganization process will be smaller and support fewer jobs than if these companies endure this difficult transition in 2009. More jobs can be saved among GM, Ford and Chrysler and their suppliers if bankruptcy reorganization is endured now than in the future.”
tagged 
Automakers, Big Three, Chrysler, GM, ford in Congress, News/Commentary
Automakers, Big Three, Chrysler, GM, ford in Congress, News/Commentary
Reader Comments (2)
What will Tom Schatz be saying when 10 million Americans are put out of work and the unemployment costs to the American taxpayer exceed $200 billion per year? Maybe the taxpayers will line up to slap his face.
Look around. 9,000 homes are going into foreclosure, hundreds of companies are closing, and thousands of jobs are being lost every single day. After these armchair automakers gave the banks $1 trillion to loan out, credit card limits are being reduced and no one can get a loan to buy anything, let alone a car.
The car makers didn't bring this $14 trillion economy to its knees. The government and the banks did. Now they're doing their best to make it worse.
$25 billion is not enough. Would you rather loan automakers $100 billion that you will end up getting back, or would you like to lose an amount climbing from $200 billion?
http://ewebsmith.com/gov/autobailout.html
This is a difficult situation because regardless of what action is chosen by the government, masses of jobs will be lost. To salvage our economy from this mess, our society (i.e. individual people making individual logical decisions) needs to focus on creating and supporting new companies in technology based markets which will create new jobs and bring money into the national economy.
We have let our economy become fragile by assuming that big business could keep big jobs and big money floating around indefinitely, but that easy decision to avoid responsibility has had consequences. Big business has almost consistently tended towards middle management and away from production.
We need to stop and ask ourselves what we still make in this country that has value. It's time to stop trying to keep our economy alive by being the managers and marketers for products manufactured and consumed in other countries. Innovation will bring prosperity.