Auto Industry Bailout Looks Like a Long Shot
A federal bailout for Ford, GM and Chrysler looks increasingly like a long shot, as the Detroit Big Three head into a hearing today before the House Financial Services Committee.
Besides hearing detailed business plans from the Big Three CEOs, the House committee will also hear testimony from some of the industry's harshest critics, including the Union of Concerned Scientists, and a New York University professor who recently advocated allowing automakers to go bankrupt.
The U.S. automakers testified before the Senate Banking Committee the day before, on Dec. 5, where even one of the supporters of a bailout, Mark Zandi, chief economist and co-founder of Moody's Economy.com, said the automakers will need a lot more than the combined $19 billion to $34 billion combined they are already requesting.
Zandi estimated the domestic automakers will actually need more than twice that much, possibly $75 billion to $125 billion, to avoid going bankrupt within the next two years.
With friends like those, who needs enemies? Yet the Detroit Three face much harsher critics today in the House.
Testimony will include David Friedman from the Union of Concerned Scientists, which sees the federal bailout as an opportunity to force the automakers to speed up compliance with tougher emissions regulations, in return for federal loans.
The UCS also wants to make it possible for individual states to write their own emissions laws. That's one of the auto industry's ultimate nightmares, since it would introduce so much more cost and complexity. Friedman is research director for the group's Clean Vehicles Program.
The House committee will also hear testimony from Edward Altman, a New York University professor who is an expert on corporate bankruptcy. Instead of a bailout, Altman recently advocated a pre-planned bankruptcy for automakers, to reduce the "surprise factor."
All things considered, a bailout before Dec. 31, which GM and Chrysler insist theyabsolutely need, looks like a slim hope.