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Wednesday, November 12, 2008
Detroit’s Big Three: Bail Them Out, or Let Them Fail?
By Joanna Ossinger
FOXBusiness
As Detroit’s Big Three auto makers continue to clamor for more aid from Washington and Congressional leadership works to make it happen, the plan appears to be facing significant resistance.
The auto makers -- General Motors (GM), Ford Motor (F) and Chrysler -- have been meeting with House Speaker Nancy Pelosi, (D, Calif.) and others in Washington to ask for additional help on top of $25 billion in low-interest loans they’ve already received, including billions of dollars in loans already granted. They’ve also been speaking in dire terms about their ability to survive without additional help.
General Motors, in particular, seems to be in difficulty. The company is burning through cash so quickly that it might not be able to fund its operations past the end of the year. Ford is in trouble as well, though it said last week that it should be able to survive in the near term.
The auto industry employs or affects millions of jobs around the country -- some reports have it as one in every 10 U.S. jobs being related to auto manufacturing -- and there are fears that if even one of the Big Three goes belly-up, the already-sputtering U.S. economy could be devastated.
However, one of the biggest headwinds for the car makers is simple sentiment. Many Americans are already irked about the bailouts of companies such as Fannie Mae (FNM), Freddie Mac (FRE) and American International Group (AIG). Lawmakers and economists are asking, “where does it end?” in terms of the government doling out money to troubled companies.
In addition, analysts have been citing the airline industry, which has seen companies file for bankruptcy and emerge stronger without much interruption in service, as evidence that bankruptcy filings from the auto makers might not be the end of the world.
The Bush administration and Congressional Republicans have been reluctant to send more aid to the auto makers, saying among other things that funds from the Troubled Asset Relief Program, the $700 billion-plus bailout plan passed a couple of months ago, couldn’t be used in that way unless Congress changed the rules.
“If Congress wants to change the law, we'll see how they intend to do it,” White House spokesman Tony Fratto said Tuesday.
Not everyone thinks a specific change is necessary to help out the Big Three. Pelosi, President-elect Obama and others have called for the money to be given out without specific legislation to allow it.
Pelosi said in a statement that the failure of the auto makers “would have a devastating impact on our economy,” and asked Rep. Barney Frank (D, Mass.), chairman of the House Financial Services Committee, to work with lawmakers in both the House and Senate to forge legislation.
The Washington Post reported that the Congressional Democrats, as well as Michigan Republicans, want to take $25 billion from TARP as a bridge loan to help the car companies survive.
Any move to help the auto makers could face its strongest opposition in the Senate, where Republicans still hold 49 of the 100 seats until the January transition.
Senate Majority Leader Harry Reid, (D, Nev.) acknowledged in a statement that approval of a bailout could be tough to get: “Senate Democrats are committed to doing all we can to help the auto industry,” he said. "But until next year, we still have the slimmest of majorities in the Senate; this will only get done if President Bush and Senate Republicans work with us in a bipartisan fashion."






