ALEX CHADWICK, host:
From NPR News, it's Day to Day. In Washington, Congress is back in session for some work before the election. Among the items, a request from Detroit's big three automakers for 50 billion dollars in loan guarantees. Joining us, John Dimsdale from Marketplace. John, what kind of loans are carmakers looking for from the government?
JOHN DIMSDALE: Well, remember last year, the government required the companies to increase their fuel efficiency from the current 27 and a half miles per gallon average to 35 miles per gallon by year 2020. Now, carmakers say that's going to take a massive re-tooling of their plants to make new engines, transmissions, chassis. In that legislation last year, Congress did give the domestic companies access to some cheap loans, but only gradually over the next 12 years. And now, the companies say that this year's gas prices have crippled their bottom lines, and they need that money and more right now. They want 50 billion dollars in government loan guarantees over the next three years.
CHADWICK: And why should the government help them out?
DIMSDALE: Well, I put that question to David Cole, who's the chairman of the Center for Automotive Research outside of Detroit.
Dr. DAVID COLE (Chairman, Center for Automotive Research): You could argue that the problem that we've seen was in many ways tied to the lack of an energy policy in this country. In a sense, the government has laid some pretty heavy stuff on the industry, and one of the consequences is a dramatic reduction in revenue by the industry.
CHADWICK: But John, you know, given the huge federal deficits, and the war costs, and now this public takeover of the mortgage giants Fannie Mae and Freddie Mac just over the weekend, do you think the government can afford yet another industry bailout? And really, does the government think so?
(Soundbite of laughter)
DIMSDALE: Well, I'll let David Cole field that question, too, because it's interesting. He's using the same too-big-to-fail argument that bankers made about Fannie and Freddie.
Dr. COLE: A serious failure of a Ford or a GM, or even Chrysler, could precipitate a much more serious problem. That's probably less expensive to do something preemptively than to wait and try to clean up a big mess.
DIMSDALE: Carmakers are quick to point out that a big government loan guarantee saved Chrysler from bankruptcy 30 years ago, and ultimately Chrysler paid back the loans early, and the government made money. The other persuasive argument that they're using here in Washington is the importance of Michigan and Ohio to the presidential campaigns. No politician wants to even contemplate the prospect of massive layoffs and unemployment from closing car plants in those states this year. But you're right. Given all the bank takeovers, the tax-rebate checks, some in Congress say that all these bailouts just add to the deficit, and others say that, you know, this financial jolt to the economy from rebuilding car factories is just what the economy needs right now. So, it's going to be an interesting debate.
CHADWICK: John, thank you. John Dimsdale of public radio's daily business show, Marketplace.
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