As DailyTech previously reported, both GM and Ford are almost out of cash. GM will likely run out of cash by the end of the quarter and have to file for bankruptcy or break up its business if the government will provide a financial lifeline. While it’s obvious that America's big auto companies lost touch in the 90s and early 2000s, producing a slew of inefficient big trucks and SUVs while foreign competitors stole away sales with more compact efficient cars, they are an integral part of America's economy.
With the fate of many major tech initiatives, such as GM's Chevy Volt and Ford's new Fusion hybrid hanging in the balance, the country's economic future also is at peril as if even one of the big three fall, it could plunge the deeper into recession -- or worse -- according to financial experts.
It’s hard not to draw comparisons to another industry troubled by mismanagement and economic misfortune -- the U.S. banking industry. And while the federal government was quick to bailout banking, finance, and housing firms to the tune of $750B USD in taxpayer burden, the government appears to be unwilling to offer the automakers a $25B USD bailout.
Flying to Washington, Alan Mulally CEO of Ford, Robert Nardelli CEO of Chrysler and Richard Wagoner CEO of GM met with members of Congress in special hearings, begging them for a share of the bailout money. Many in the Senate, led by Republican opposition were unimpressed. Some Senators went as far as to mock the CEOs use of private jets as they came asking for financial relief.
"It's almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious," stated Rep. Gary Ackerman, D-New York.
He added, "There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they're going to be trimming down and streamlining their businesses."
He continued to mock the auto executives, remarking, "Couldn't you all have downgraded to first class or jet-pooled or something to get here? It would have at least sent a message that you do get it."
Senate Majority Leader Harry Reid has declined to move the bailout measure towards a vote as the measure appears far short of the 60 vote majority needed.
The automakers were grilled at the hearing from all sides. Rep. Brad Sherman, D-California, asked the automakers to raise their hands if they flew commercial. No hands went up. He then chided, "Let the record show, no hands went up. Second, I'm going to ask you to raise your hand if you are planning to sell your jet in place now and fly back commercial. Let the record show, no hands went up."
The executives refused to respond to the sarcastic remarks on the Senate floor, instead trying to shift the focus to how they're restructuring their business. Later, spokespeople for the companies defended the use of jets, saying CEOs need them for safety and most major American companies use them. GM spokesman Tom Wilkinson stated, "Making a big to-do about this when issues vital to the jobs of millions of Americans are being discussed in Washington is diverting attention away from a critical debate that will determine the future health of the auto industry and the American economy."
Chrysler's spokeswoman Lori McTavish said in a press statement, "While always being mindful of company costs, all business travel requires the highest standard of safety for all employees."
Some political analysts are supporting the harsh Congressional criticism. Says Thomas Schatz, president of the watchdog group Citizens Against Government Waste, "If it is simply the company's money at stake, then only the shareholders can be upset or feel as it might be excessive. [But in this case] it's outrageous. They're coming to Washington to beg the taxpayers to help them. It's unseemly to be running around on a $20,000 flight versus a $500 round trip."
quote: And while the federal government was quick to bailout banking, finance, and housing firms to the tune of $750B USD in taxpayer burden, the government appears to be unwilling to offer the automakers a $25B USD bailout.
quote: Yeah your highs are higher then ours wen economy go's good, but your lows are also lower when it go's bad,
quote: Are you just trying to make people in Europe look extremely uneducated (if so you are succeeding brilliantly)? Maybe you are very drunk, or on crack, or both?
quote: Why are you posting comments when you obviously haven't passed 3rd grade English (or were just socially promoted to graduation)? Your spelling is deplorable.
quote: i have met a hell of a lot of Americans and 90% only can speak English and non other languishes
quote: At least the car makers didn't cause the problem themselves like the banks did.
quote: In my opinion, battery electric will never be practical. electric using on board energy production, will.
quote: I certainly hope you see the difference between tax breaks and subsidies.
quote: I agree that GM and Ford need to shape up but.... a good deal of their problems are down the the deals done with the unions in the past
quote: Many people feel safe in criticizing the U.S. auto companies, because they buy Toyotas and work in a completely unrelated field. They feel safe and sheltered from its issues, but little do they realize that if the industry fails, they may eventually lose their jobs as well.
quote: Being raw materials will be in surplus, they will be more likely to ship to other countries, making the cost go up here
quote: Detroit Three would result in direct and indirect job losses of 2.5 million to 3 million in 2009. (This figure was also cited by Governor Granholm.)
quote: The study uses data from 1998 to 2001, and the industry has changed significantly since then. Employment in the motor vehicles and parts manufacturing sector has fallen, for example.
quote: 2) Much more importantly, it is an industrywide study: The auto-related jobs covered in the report include more than those dependent on the Detroit Three; they are related to cars sold by any manufacturer
quote: In other words, the loss of a single American car company wouldn’t necessarily dissolve all those jobs that the entire auto industry “supports.”
quote: Whomever wrote that article is being pretty bias,
quote: but you would lose a huge amount of manufacturing jobs as only assembly would be required.
quote: you have to consider the financial impact to the entire nation for letting them fail.
quote: Also, isn't it kind of a double-standard - I mean we bail out AIG, banks, investment firms without any "tarring and feathering," but when it comes to the auto industry, they bring in the CEOs and make a circus out of them.
quote: The failure to loan money to the automotives is not a realistic option. There are no other alternatives.
quote: se principles can and will dominate in the long term
quote: Do you think the UAW wants to still be involved with the UAW?
quote: Let the market work
quote: When bread is $10 a loaf cause our money isn't worth crap, will you still be asking for bailouts?
quote: how me written proof that the Great Depression was CAUSED by no bailouts,
quote: Great Depression was caused by many things, none of them being the government not paying bailouts to people. Stop using scare tactics to try to get people to blindly follow this crap, it is insane.
quote: You understand that they are printing money to do these bailouts, right?
quote: Actually, no, it is not the role of the government to fix the market.
quote: So you blame the government for banking industries piss poor lending decisions?
quote: bad lending to even worse customers
quote: You say it is the governments fault they made bad loans because of not regulating
quote: It was their fault, plain and simple, they need to pay for it.
quote: The auto industry, on the other hand, is inherently inefficient--they don't have the desire to come out with reasonably cheap, efficient cars which won't continually need repairs after so many months--if the industry were to go bankrupt--it wouldn't mean the end of employment in the auto sector--Toyota and other companies produce here too--customers would benefit as their consumer surplus would shoot up--and with it,consumer welfare
quote: While it’s obvious that America's big auto companies lost touch in the 90s and early 2000s, producing a slew of inefficient big trucks and SUVs while foreign competitors stole away sales with more compact efficient cars, they are an integral part of America's economy.
quote: The big three made trucks and SUVs because that's what people WANTED. They would not have made them otherwise. The F-series was THE best selling VEHICLE in the US until recently. The big three were in perfect touch with what people wanted. Gas was cheap. People wanted big cars. People bought them by the millions.
quote: (if you don't have insurance, try "neogtiating" your bill and see what happens...
quote: Why do you think generic prescriptions that do the exact same thing cost $5 or $10?
quote: There's no need to drive a 400HP car because you will NEVER get to drive it fast enough.
quote: Capitalism is a failed system.
quote: The only system that works is Socialism
quote: hence why the US has the highest GDP of any country
quote: Taking a poor country and giving them a capitalist economic system still isnt going to make much difference if they didnt have much money to start with before they made the transition.
quote: I think the few hundred years of free labor had something to do with that...just saying.
quote: Egypt has slaves
quote: You just love WWII don't you? WWII was not the fix for everything.
quote: Slavery helped build this country to be great just like it did to damn near every other super power in the past.
quote: Capitalism has also existed in Brazil , Argentina, India--why aren't their GDPs equally big--
quote: the US has the highest GDP of any country
quote: In the 1930's it was proven that Capitalism, without control, without government input, without support for the poor or the working man, is a failed system.
quote: You think that because the US is able to print borrowed money the US is doing fine. The US isn't doing fine, the US hasn't been doing fine and the US won't be doing fine
quote: There is one simple reason why the US bought unimaginably thirsty cars. The reason is marketing.
quote: They are the ones who prevented legislation forcing them to produce more efficient cars, claiming it would hurt their production and their income.
quote: The only system that works is Socialism, as Europe isn't in nearly as bad a shape as the US.
quote: There is one simple reason why the US bought unimaginably thirsty cars. The reason is marketing. In the 80's when the first electric car was designed and ready for mass production it wasn't the oil firms who killed it, it was GM. They are the ones who have been responsible for their own demise. The oil firms also played a big role in the idea that the bigger the car, the better it is. There's no need to drive a 400HP car because you will NEVER get to drive it fast enough.
quote: Capitalism is a failed system
quote: they had nothing to do with the inferior aesthetics, engineering, design, construction and just about every aspect of every American car
quote: I do blame them for actively lobbying Washington for lower fuel efficiency standards for decades.
quote: Domestics are getting better every year. I love my "new" GTO.
quote: In all fairness, that "Domestic" GTO was designed and built in Australia. So too is the G8 and upcoming Camaro.
quote: It *seems* greed has killed deregulated capitalism, now will those that support the capitalist theology continue to advocate it while trying to ignore the evidence that it doesn't work?
quote: Socialism is not perfect, definitely not. But I do think a mix of socialism and capitalism is the best way forward, unfortunately I feel too many will equate it with red star wearing commie.
quote: The greedy need to be controlled with regulation, that seems to be the sad fact coming out of the economic downturn.
quote: Lets face it - in the wider interests, GM, Ford and Chrysler cannot be allowed to go down - but, they cannot be allowed to continue to make the same mistakes without punishment.
quote: Once they realized that they people could pay - those industries came to a crash.
quote: quote: Once they realized that they people could pay - those industries came to a crash.
quote: The only difference between capitalism and socialism is that capitalists work to achieve their selfish ends.
quote: They create money out of thin air and loan it to banks at that interest rate and then the bank gives people or buisnesses a loan at a higher rate then the FED.
quote: Also, as an economist, slightly offended you'd lump that philosopher in with a group of people who instead of spouting moral philosophy