Q&A: Will Congress Bail Out Detroit Automakers?

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General Motors, Ford and Chrysler have asked for $25 billion in government loans to survive the economic crisis — that's in addition to the $25 billion Congress approved in September to foster fuel-efficient technology.

Congressional Democrats are urging the Treasury Department to provide the loans, but Treasury has balked so far and, overall, Congress doesn't seem to have much enthusiasm for another bailout.

Here, a look at the politics and economics behind the request by Detroit's Big Three.

The auto manufacturers have been hunting for money in Washington. Where do things stand?

In the past several days, the bailout request has looked like a hot potato. Late last week, the heads of GM, Chrysler and Ford met with Democratic House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid. Both said they wanted to help the car companies but made no promises.

Over the weekend, the two Democratic leaders asked the Treasury Department to see whether it could use some of the $700 billion bailout fund to help automakers. On Monday, White House Press Secretary Dana Perino essentially said, "No, thanks," and tossed the request back to Congress.

Are there specific reasons political leaders are reluctant to back loans right now?

Yes. GM officials say Treasury told them the bailout money was designed for financial companies, not for industrial ones. And, politically, the request comes at a bad time. The country is between presidential administrations and waiting on a new Congress, so there is a natural reluctance to take on something that is certain to be controversial.

Democrats have expressed support for helping the car companies. President-elect Barack Obama called the auto business "the backbone of American manufacturing," but he doesn't take office until Jan. 20.

Ford and GM are each spending more than $2 billion in cash every month; GM says it could run out of money soon. Can the companies wait for a new administration?

It depends on whom you talk to. One GM official said, "No, we can't wait until February." But GM CEO Rick Wagoner has also said that the company isn't burning cash as quickly as it was.

John Casesa, a New York-based auto analyst, said GM could raise money by selling assets, such as Saturn or Saab. He says waiting for a new Congress is "a crapshoot" but thinks GM might be able to stay afloat until spring.

Even if the Detroit companies get federal loans, what is the outlook for workers?

Grim. The best-case scenario is more big layoffs. The Detroit auto business is getting hit from all sides. High gas prices destroyed a business strategy that relied on high-profit SUVs. Then the credit crunch and the recession wiped out consumer demand.

Last year, about 16 million vehicles were sold in the U.S. Next year, that number is expected to fall to 12 million. Simply put, there are too many workers making too many cars for too few customers.

Michelle Hill of Oliver Wyman, a management consulting firm, estimates that an additional 30,000 autoworkers will probably have to lose their jobs and 10 more plants will have to close. She says the job losses at dealerships and parts suppliers will be considerably bigger.



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