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."