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WASHINGTON: America's major auto manufacturers are struggling to convince politicians in Washington to offer them a financial life-line. Ford, Chrysler and General Motors (GM) say they need short-term cash to prevent their collapse.
But some in the US Congress oppose providing them with an emergency loan and say it is time to let them fail.
The "Big Three" US car companies - Ford, Chrysler and GM - have come to Washington to plead for a US$25 billion loan. They are haemorrhaging cash as they struggle to keep up with their financial obligations.
GM’s boss warned that his company could run out of money in a matter of weeks.
"What exposes us to failure now is the global financial crisis, which has restricted credit availability and reduced industry sales to the lowest per-capita levels since World War II," said the chief executive of GM, Rick Wagoner.
"Our industry which represents America's real economy ... needs a bridge to span the financial chasm that has opened up before us."
More than 100,000 jobs have been shed from the industry since January and unions have agreed to bring wages in line with their foreign competitors. Efforts have also been made to develop more energy-efficient cars to try to catch up with companies like Honda and Toyota.
But some political leaders say the big US car companies should be left to go bankrupt because they have failed to adapt quickly enough.
"Industry analysts contend that the firms trail their major competitors in almost every category necessary to compete and make a profit," said Republican Senator Richard Shelby.
The US auto companies have warned that failure to act now could lead to the collapse of all three vehicle giants and the loss of around three million jobs in auto-reliant industries.
Some industry analysts say foreign car companies with operations in the United States may consider stepping in. But most say they would not want to buy the whole companies, because of large pensions, healthcare and redundancy costs.
"Rather than, for example, Toyota, Hyundai, or someone coming in and buying up Chrysler, buying up GM, buying up Ford, ... (they may) look at specific pieces that might be attractive to them. For example, earlier this year, Tata bought Jaguar and Land Rover from Ford," said Troy Stangarone from Korea Economic Institute.
Many economists say there will be little or no growth in car sales in the United States over the next few years, which will also affect decision making at foreign car companies.
"We'll probably see some retrenchment of some of the foreign transplants that have invested in the United States because of the decline in demand, a sharp drop in US auto sales that is likely to continue over the near term," said Jeffrey Schott of Peterson Institute.
Advocates of this US$25 billion loan are hoping lawmakers will vote to approve it sometime this week.
- CNA/yt
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