Pelosi to Big 3: Bring us a plan
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid promise to try to get help for automakers after Thanksgiving. But the automakers have to make a convincing argument for why they need it. Alisa Roth reports.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid at a press conference on the auto industry. Rep. James E. Clyburn is behind them. (Mark Wilson/Getty Images)
More on The Economy, Auto Industry, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: After a couple of grueling days on Capitol Hill, Detroit's Big Three car makers have been sent home with some work to do. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid promised to try to pull some help together after Thanksgiving, that is, if the automakers themselves can come up with a convincing argument for why they need the cash. We asked Marketplace's Alisa Roth to explain what might be convincing enough.
Alisa Roth: You might call it a Dear Rick letter. As in GM's CEO Rick Wagoner. Or Dear Bob. As in Chrysler's Nardelli. It's the letter Nancy Pelosi and Harry Reid sent the Detroit Three today. Because Pelosi says she needs some answers.
Mary Ann Keller: We have some problems because they keep changing their requests. We want it in writing. What is it that they want it for.
That's what Mary Ann Keller wants to know. She's an independent auto analyst. She says there's some very basic information any company should offer when it asks for money. Whether it's a loan or an investment.
Keller: What is your forecast for the economy? For vehicle sales? For your production? For your operating profits? What are you going to use this money for?
She says it's not even about the companies building better cars. Right now, they're in so much trouble, it's just about how to pay their bills -- to suppliers, to workers, to everybody. But in order to get the money to pay those bills, the Detroit Three may well have to convince all those people to pitch in. Edward Lapham is executive editor of Automotive News.
Edward Lapham: The UAW members have to do it. They'll freeze pay raises inside the company probably. Some of the top guys will work for a buck a year until the loans are paid back or they'll work for stock options or they'll work for something else that sort of is pegged to their performance and how well they'll do.
The Detroit Three may be listening. Today, GM announced it's turning in two of its corporate jets. Of course, there's always room for more cuts. For now, the company's reportedly hanging on to the remaining three.
In New York, I'm Alisa Roth for Marketplace.
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From Hingham, MA, 11/25/2008
Auto Crisis -- "The 15% Solution"
I am not an economist. So, I expect my practical approach to reviving US auto makers will be viewed as too pragmatic or maybe too slow moving in generating dollars to the big 3. Still, I think there is merit to this conceptual scheme.
'The 15% Solution" -- One possible approach to dealing with the auto crisis: The federal government should give any one who buys a fuel efficient car from the Big a 15% instant rebate back on the selling price and an extended warranty. This program could have say a 12-18 month time limit. The total of the rebate dollars and cost of the warranty would constitute a loan the auto makers would have to pay back.
If effective, this solution would immediately jump start US auto makers by giving them a huge advantage over the competition while they work on the remaining legacy issues. Auto makers would stay employed and no money (or much less) would go directly to the car makers. I realize there may be issues re my plan in that the auto makers don't get a big $$$ infusion instantly and that they may not be able to produce/convert to fuel efficient car fast enough (due to retooling and research) without some cash ASAP. That may have to be considered.
Joseph Hare,
Hingham, MA
JoeHareJr@Aol.com
More.....
A quick direct "15%" instant government rebate (say averaging around $3,000) from the Dept of Treasury paid to consumer with purchase of a US auto maker lower mileage car might make these cars especially attractive.
The problem with the fed using IRS tax return deductions is you only get indirect value (a lower tax payment) and but once a year (April 15)....and higher wage earners get more real dollar benefit.
If you could buy a Camry priced today at $20,000 for $20,000 versus a Malibu priced today for $20,000 for $17,000 (plus get a100K mileage warranty), which would you buy?
Giving a big bailout just keeps big 3 them from going bankrupt while they try to regain market share. They have not succeeded in doing that over the last 20 years. Assuming Americans were motivated to buy fuel efficient Gm-Ford-Chrysler cars, the biggest stumbling blocks might be that the auto makers could not retool fast enough to produce enough low mpg cars to get profitable; that they could not get rid of their gas guzzlers; and that they can not work out union differences..
I am about to buy another Toyota; but as a US citizen if I was presented with a good alternative to switch back to an American owned company, I would. GM and Ford are building some good cars now. If Bankrupty happens the courts should mandate a warranty to offset consumer concerns.
Joseph Hare www.Hammondre.com
JoeHareJr@Aol.com
617 755 0898
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