George S. May Business Blog

The big three automakers round two.

Just weeks after they were turned down, the American ‘big three’ automakers were back yesterday on Capitol Hill, once again asking for money.

“We are here today because we made mistakes which we are learning from, because some forces beyond our control have pushed us to the brink” said Richard Wagoner, Chmn and CEO, General Motors Corp. Or maybe it is because the three companies have lost a combined three billion dollars in the two weeks that past since they were last there.

A morose, disgruntled attitude lofted through the room the entire day as the Chairmen, CEO’s and Presidents, continued to plead their case that it was almost absolute they would be shutting down their operations without help from the government.

Lawrence Burns, VP of Research and Development at GM corp.’s response when asked if in fact this was correct: “Absolutely. If there is not action by the end of this month there is a real risk that our company will collapse and the auto industry will collapse”.

Well how much money will it take? While the big three have asked for somewhere in the range of 35 billion dollars, economist Mark Zandy, who was sitting with the automakers, happened to disagree.

“It would ultimately need between 75 billion and 125 billion dollars to avoid this fate” said Zandy.

But the attitude of Congress was once again skeptical and furthermore disapproving of the bailout. Senator Richard Shelby, a Republican Ranking Member of the Banking Committee spoke out before the automakers even had a chance to relate their side declaring “I intend to oppose bailing out the big three auto manufacturers”. Senator Bob Corker even suggested that they were pursuing the money only in order to prop them ino a position where they would be able to sell the companies.

Robert Nardelli, Chmn and CEO of Chrylser LLC, responded swiftly:

“I don’t wake up every morning thinking about how to sell the company. We’re busting our guts and the people that are left are busting their guts to make this thing work.”

Nonetheless, Congress began discussing ideas that would substitute or even complement a bail out. One idea would be to grant the money and in conjunction, create a federal car ‘czar’, so to speak, that would oversee all three companies. The desperation of the auto execs was obviously substantial as they all agreed, responding promptly with ‘yes, sir’.

All in all, the hearing ended quite the same. Except this time the big three scooted off in hybrid and electric cars rather than their private jets. Good show, gentlemen. Good show.

Well, if in fact Congress denies them the bailout money, what options remain?

The big three have declared that they will march, or perhaps scoot, straight to the White House in an attempt to obtain a portion of the $700 billion being used to bailout the financial system. Another option would be to convince the Federal Reserve to print money and loan it to the automakers.

Ether way, all parties agreed that something must be done soon:

“Nothing concentrates the mind like a death sentence and were looking at a death sentence here if we don’t respond intelligently and prudently.” Senator Christopher Dodd Chairman, Banking Committee.

Should Congress grant the automakers the money? What will be the repercussions if they do? If they don’t?

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