Union Warns Congress: Don't Let Automakers Fail

(MoneyWatch)  The Detroit 3 and the UAW presented a united front at a hearing before the Senate Banking Committee, insisting that the present downturn in auto sales is not of their making, and asking Congress for bridge loans.

UAW President Ron Gettelfinger might have had the most effective presentation, stressing the dire consequences to his members and to the whole U.S. economy if the Detroit 3 are allowed to go broke.

"The UAW submits that it would be far better for the auto industry and its workers and retirees, and for the nation as a whole, for the federal government to take prompt action now to prevent the imminent collapse of the Detroit-based auto companies. The human toll will be far less. And the ultimate cost to the government will be far cheaper," Gettelfinger said in a written statement on Nov. 18.

Meanwhile, another witness provided an directly opposing viewpoint. Peter Morici, an economics professor named from the University of Maryland, baldly stated that sooner or later, the Detroit 3 are going to go bankrupt and need to be reorganized anyway, so it's better to get it over with.

(The Detroit CEOs and Gettelfinger must have turned stony-faced when they heard that, assuming they ever did hear it in person.)

"By assisting the Detroit 3, Congress can delay one or all of them going through Chapter 11 reorganization but sooner or later one or all will face reorganization. The communities and suppliers dependent on these companies would be better off going through that process now than by delaying it with assistance from the federal government," Morici said.

Separately, Gettelfinger had anticipated the argument in his remarks. "The UAW wants to underscore that this would not be a painless, 'pre-packaged' bankruptcy reorganization as some columnists have suggested. Consumers will not buy vehicles from a company that has filed for bankruptcy," he said.