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Q&A: Will Congress Bail Out Detroit Automakers?
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Q&A: Will Congress Bail Out Detroit Automakers?

Economy

Q&A: Will Congress Bail Out Detroit Automakers?
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MELISSA BLOCK, host:

While AIG is getting billions of dollars, the Detroit automakers are asking for their own bailout. And so far, they are not getting it. General Motors, Ford and Chrysler have requested $25 billion in loans on top of money Congress approved in September. Democrats in Congress are urging the Treasury Department to provide the money, but Treasury has so far refused. And overall, Congress doesn't seem to have a lot of enthusiasm for another bailout. NPR's Frank Langfitt has been covering the auto industry's troubles, and he joins us now. Hey, Frank.

FRANK LANGFITT: Hi, Melissa.

BLOCK: And the Detroit car makers were making the rounds, looking for money here in Washington. What's the latest on that?

LANGFITT: Well, you know, Melissa, the last several days it's, sort of, this request has looked like a hot potato. The automakers - as you remember, we reported on All Things Considered last week - they went to House Speaker Nancy Pelosi and Harry Reid, the majority leader, asking for this money at a sit-down meeting. And coming out of it, the Democratic leaders, they expressed support, but they wouldn't make any promises. Now, over the weekend, they wrote to Treasury, and they said, you know, could you look at this $700 billion bailout? Can you take some money here? Well, this morning, Dana Perino, the White House press secretary, she essentially said, you know, no thanks. And she tossed the request back to Congress.

BLOCK: And what's the reluctance for political leaders to be not supporting this bailout?

LANGFITT: Well, there are a lot of reasons. You know, one is officially, Treasury told the car companies that the bailout is for financial firms, not for industrial ones like them. The other thing is that there's bad timing here. You know, this comes between administrations, so there's a certain amount of reluctance and inertia. And I think - you know, I don't know this for sure - but from the White House's perspective, I think they think, you know, if the Democratic Congress wants to do this, then they should put it out there, maybe in this special session that Nancy Pelosi's been talking about.

You know, on the Democratic side there are signs for support for this. In his first press conference, President-elect Obama, he called the auto business, quote, the backbone of the American manufacturing. And he's told his transition team to look for maybe more legislation to help them. But it's going to be a while until he comes into office, so we're going to have to wait and see.

BLOCK: Now, Friday, Frank, both Ford and General Motors said they were each burning through more than $2 billion in cash every month. GM said it might run out of money to operate quite soon. Can the auto companies wait for a new administration?

LANGFITT: Well, you know, this is the question. I mean, how urgent is this? I talked to a GM official today, and he said, quote, no, we can't wait until February. But going forward, GM actually is not going to be burning as much cash as they were in the past. And an analyst I talked to said, you know, GM could sell Saturn or Saab and raise some money. This could buy them some time, maybe get them to spring. The analyst said, you know, it is a crapshoot because you don't quite know how things are going to go. But it may give Congress a little more time to get to this issue.

BLOCK: Now, if the companies were to get federal loans, Frank, what's the outlook for workers?

LANGFITT: It's grim, you know. I mean, this is the kind of fact that I was kind of - coming to terms with this today, talking to analysts about the actual numbers. I think no matter what, you're looking at big layoffs again. One analyst I talked to said at least 30,000 autoworkers will have to lose their jobs. Ten plants must close, and many more dealerships and auto suppliers. So the bottom line is this: The economy for these automakers going forward - you know, you had - high gas prices destroyed their business strategy, which was built on these high-profit, you know, gas-guzzling SUVs. And then with the recession and the credit crunch, consumer demand was just wiped out.

So keep in mind these numbers as we go forward because this really determines the fate of the auto industry. Last year, about 16 million vehicles were sold nationally. The next year, it's expected to be about 12 million. So no matter what the government does, a lot more people in the auto industry are going to lose their jobs.

BLOCK: So bailout or no bailout, really grim times ahead.

LANGFITT: I think it really is.

BLOCK: NPR's Frank Langfitt, thanks very much.

LANGFITT: Happy to do it, Melissa.

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