What's Next For The Auto Industry?
ROBERT SIEGEL, host:
This month may determine the fate of two of the Detroit three automakers, General Motors and Chrysler. Each has already received billions in government loans amid the current economic crisis. But to survive, each needs billions more. Before they get any more money, they need to convince the White House that they have viable long-term business plans, and they have to do that by the end of this month.
NPR's Don Gonyea reports.
DON GONYEA: The president is on the record, he wants there to be a U.S. auto industry, not the one we have, but one he describes as restructured and re-imagined. All three American car companies are struggling, but Ford has so far avoided asking the federal government for help, not so GM and Chrysler. Each is on the brink and has come with hat in hand.
Combined, they've already received more than 17 billion in loan guarantees. They want 22 billion more. The go-to guy in Washington for desperate industries is Treasury Secretary Timothy Geithner. The Secretary was on PBS's "Charlie Rose Program" last night, explaining why bankrupt car companies would be bad for the whole country.
Secretary TIMOTHY GEITHNER (Department of Treasury): A disorderly failure of these firms (unintelligible) would cause enormous damage in terms of job loss across a whole range of industries. And in a recession like this, you have to be pretty considerate of things you would never consider in a more normal economic environment.
GONYEA: Geithner has a taskforce on the auto industry, and this week, four of its members were in Detroit holding closed-door meetings. The local media did their watching from the street, from parking lots, and from TV news helicopters, looking for any kind of a positive sign.
Unidentified Man #1: Action news was there as GM CEO Rick Wagoner greets members of President Obama's auto taskforce. The influential panel leaders took a drive in a test version of the cutting-edge Chevy Volt, as you can see in this exclusive video shot by Chopper Seven.
GONYEA: Taskforce members drove the prototype of GM's new plug-in electric hybrid, the Volt, expected to go on sale next year. They also drove the new Dodge Ram truck built at a retooled and modernized assembly plant. Still…
Mr. DAVID SEDGWICK (Editor, Automotive News): Our impression is that it was mostly show and tell because the heavy lifting hasn't occurred yet.
GONYEA: That's Dave Sedgwick, editor of Automotive News. He says it's good that these taskforce members got behind the wheel and saw product and assembly operations up close. But right now, the real urgency for the auto companies is slashing debt obligations, some $60 billion at GM alone. And that's really job one for the carmakers, and they have just 20 days left.
Mr. SEDGWICK: General Motors and Chrysler still have to negotiate concessions with other stakeholders like the bondholders, and they may get, who knows, 30 cents on the dollar. I think they want about 50 cents on the dollar, but you get the idea.
GONYEA: Bondholders get the idea, too, but they also know they'd get even less if no deal is reached and bankruptcy follows. At the same time, the United Auto Workers Union is also being asked to give concessions to help the company pay for another major cost, funding a new system to pay for negotiated healthcare benefits for thousands of retirees. But Sedgwick says the UAW wants to see what bondholders give before it agrees to anything.
Mr. SEDGWICK: So, nothing is moving quickly.
GONYEA: It doesn't help that the recession and frozen credit markets have hammered car sales. After averaging around 15 million cars and trucks sold annually for 25 years, U.S. carmakers now project sales of only around nine million this year.
Don Gonyea, NPR News, Washington.