Government lends a hand to autos
The government is talking with GM and Chrysler about giving the auto companies some help, but not a bailout. Scott Jagow talks to Nancy Marshall Genzer in Washington about what separates this move from a bailout.
New GM Chevrolet trucks sit on the lot at a General Motors plant (Bill Pugliano/Getty Images)
More on Auto Industry, America's Financial Crisis
TEXT OF INTERVIEW
Scott Jagow: This morning's hot topic: the car industry. Based on several reports, it looks like the government is talking with GM and Chrysler about giving them some help. But not a bailout, ala Chrysler back in 1980. Our correspondent in Washington, Nancy Marshall Genzer, joins us. Nancy, OK then, what kind of help then?
Nancy Marshall Genzer: At this point, Scott, it looks like it would be a loan -- a $5 billion loan. And that would come from the $25 billion in low-interest loans Congress approved for the auto industry already. The loan would be administered by the Energy Department. Now, there are a couple of other possibilities. The Treasury Department could use its authority under the $700 billion bailout package to help, although it's not clear what form that would take.
Jagow: OK, so what would GM and Chrysler plan to do with this loan?
Marshall Genzer: They want to merge -- GM and Cerberus Capital Management, of course, which owns Chrysler. And one analyst from Citigroup says a merger would cost $10 [billion] to $12 billion, because if you think about it, there are almost 100,000 factory workers working for both automakers. They have 11 different brands, 10,000 different dealers. There would definitely be some consolidation there, and initially that would cost money.
Jagow: And why would the government want to do this?
Marshall Genzer: Well, the automakers are in big trouble, and they are a major industry in the U.S. Moody's just cut its rating on GM bonds to junk status. Ford is also in junk status. So they're in real trouble, and they say if they went under, a lot of people and industries would be affected. So they say the government really needs to help them, or they could drag other businesses with them.
Jagow: Nancy Marshall Genzer in Washington. Thank you.
Marshall Genzer: You're welcome.
Comments
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From Aviano, NY, 10/30/2008
I think we need to re-look what Capitalism means...do not make money..go out of business. So now .me Mr Tax payer is going to bail out the auto industry! Who are basically still making rubbish folks do not want to buy..poor management..lack of foresight..poor planning...I say let them go under..help the work force get another job..to hell with the companies.
From MI, 10/30/2008
Instead of a bailout in the traditional sense, why not spur spending by the consumers by allowing for a tax credit for two years after purchasing a vehicle (not leasing) from Ford, GM, or Chrysler. The tax credit would be equivalent to $450.00 / Month / vehicle. The duration of the program would be three years and unlimited number of vehicles per family.
From McKinney, TX, 10/28/2008
It's bad enough to have to have the car companies be the next receivers of taxpayer money, but to get taxpayer money to do a merger is even worse. People lose in mergers. Not just on the assembly line, but all the way up to the executive offices. The taxpayers will be paying the car companies to lay off people that will now need help from taxpayer supported assistance programs? And for the political side that is so critical of the other side that they will have to raise taxes, how are you going to pay for the tax money giveaways and increased burden on social programs without raising taxes? If we are going to have to give our money to the car companies, they must be required to use it to do the right things. Like build cars for the growing market segment of people who have suffered from lost income and need affordable cars that cost less and are cheaper to operate. And require them to provide the financing advertised on TV without the fine print "Advertised financing only available to those who don't need it to afford a car"
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