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More Bad News For U.S. Carmakers
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More Bad News For U.S. Carmakers


More Bad News For U.S. Carmakers

More Bad News For U.S. Carmakers
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U.S. automakers Ford and GM have announced more big losses. The two companies, along with Chrysler and the United Auto Workers, are asking Congress for billions in loans to help them get through the next few months. Analysts say the companies are burning through cash reserves fast.


From NPR News, this is All Things Considered. I'm Michele Norris.


And I'm Robert Siegel. Today, Ford and General Motors announced that over the past three months, they burned through cash at a rate of more than $2 billion a month. At that pace, GM says it might not be able to fund its business by early next year. NPR's Frank Langfitt has our story.

FRANK LANGFITT: America's financial crisis has been filled with numbers bigger than most of us can grasp. So, it's worth taking a moment to consider the figures GM hit investors with today. From July through September, the company blew through almost $7 billion. That means, GM had to spend more than $3 million of its reserves each hour, that's right each hour just to keep the lights on. Kim Korth, a Michigan auto analyst said the company is at risk.

Ms. KIM KORTH (Auto Analyst, Michigan): If this crisis goes much beyond three to four months at the level they've been operating at for the last couple months, they're out of money.

LANGFITT: And what happens when they run out of money?

Ms. KORTH: That would be catastrophic. They would have to declare - they would have to go into bankruptcy.

LANGFITT: The problem is this, auto sales have collapsed. Most people don't want to buy big ticket items in a recession and those who still do have trouble getting loans because of the credit crunch. Faced with plummeting demand, some businesses might just slash cost overnight but GM and Ford can't. Korth says they're huge industrial companies with big expenses and legally binding union contracts.

Ms. KORTH: Even if you decided to shut down a plant or layoff a number of people which they've done in various areas, it still has cost, that could help you a year from now but it actually adds more cash requirements in a short term.

LANGFITT: GM CEO Rick Wagoner said today his company has no intention of filing for bankruptcy but he also insisted that the Detroit three need a $25 billion government loan to survive the recession. And in an interview with CNBC, he said GM needs the money soon.

Mr. RICK WAGONER (CEO, General Motors): I think it's critical that we move fast. And I hope that Congress takes it up immediately.

LANGFITT: Many ordinary people opposed bailing out Detroit. They say the companies contributed to their problems by making strategic blunders. But Wagoner said letting GM fail would cause much bigger damage across the economy and he invoked the government's decision to let Lehman Brothers go bankrupt as a cautionary tale. Letting Lehman go is now widely seen as a big mistake that deepened and broadened the financial crisis.

Mr. WAGONER: You know, I think the lesson from Lehman is the very important time in difficult times we're in really requires policy makers to try to be ahead of the problem rather than reacting to the problems.

LANGFITT: Wagoner and his fellow executives at Ford and Chrysler made their case to house speaker Nancy Pelosi yesterday. Ron Gettelfinger, head of the United Auto Workers was at the meeting too. In addition to a $25 billion loan, Gettelfinger also pressed for another $25 billion so the companies can fulfill their healthcare obligations to the union. Congressman Sander Levin, a Michigan Democrat acknowledged that the companies have made mistakes but he also says they'd made the changes they need to survive.

Representative SANDER LEVIN (Congressman, Michigan): The big three has made clear that once they get passed this period they really believe they've got the quality, they've got what it takes to produce the cars of today and the future.

LANGFITT: The Detroit auto makers are asking for the loans in an economic stimulus bill speaker Pelosi wants to pass in a lame duck session later this month. Levin said he was hopeful it would happen but so far, Pelosi has made no promises. Frank Langfitt, NPR News, Washington.

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Automakers Lobby Pelosi For Bailout Cash

Automakers Lobby Pelosi For Bailout Cash
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The leaders of Detroit's Big Three automakers — Ford, GM and Chrysler — have met with House Speaker Nancy Pelosi to ask for $25 billion in emergency loans. That figure is in addition to the $25 billion Congress approved in September.

Faced with the worst sales numbers in years, General Motors and Chrysler are seeking money to stay afloat.

"They're really in bad shape. Sales were bad when gas pieces were high, but now with the credit crunch and certainly what looks like a recession, consumer demand has really collapsed," NPR's Frank Langfitt tells Robert Siegel. "GM, right now, is burning through about $1 billion a month, and analysts say it needs a new infusion of cash or it could run out sometime next year."

Some of the auto executives have been making the rounds in Washington for weeks, asking for money from different agencies. They are now turning to Pelosi, because they are not having much luck elsewhere.

"They were looking at the $700 billion bailout money, but Treasury wasn't really receptive," Langfitt says. "At the time, GM was talking about using that money to merge with Chrysler, but it was going to cost tens of thousands of jobs, and Treasury, understandably, didn't like the idea of giving taxpayer money to pay for a merger that was going to put so many people out on the streets."

The automakers also have access to $25 billion in funds from the Energy Department, approved by Congress in the fall. That cash can only be used for research and development — not operating expenses. The companies can apply early next week for the money.

The automakers' best hope for funds from Congress is the potential lame-duck session later in the month, when there might be a fiscal stimulus bill. The House hopes that by pumping more money into the economy, a deeper recession can be avoided.

"What the auto companies are hoping for is to get money in that package for themselves," Langfitt says. "In theory, this would be the quickest way for them to get it, and they could tie it closer to the idea of a recession, which might create a little more political cover for them."

Many people, however, blame the auto companies for their own problems. U.S. automakers built high-profit sport utility vehicles, but the market for SUVs declined when gas prices spiked. Voters in Tuesday's election made clear they did not like the $700 billion financial bailout of Wall Street, so a bailout for automakers may be unpopular, too.

Despite angry opposition to a potential bailout, auto companies contend that if they go bankrupt, there will be huge job losses, not only on factory floors, but also in dealerships and parts suppliers.

It is unclear, however, whether a bailout would solve auto companies' problems. The carmakers say they need the money to get to the year 2010, when they are due to see big savings from health care cuts and new car models.

"Of course, a lot of Americans feel they have heard this before," Langfitt says. "In the meantime, we have too many workers making too many cars for people who aren't buying them. It looks like there could be a need for more layoffs."



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