Big Three bailout may not help sales

(Left to Right) Ford Motor Company CEO Alan Mulally, Chrysler CEO Robert Nardelli and GM CEO G. Richard Wagoner, Jr. testify during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill -- November 18, 2008

TEXT OF STORY

Scott Jagow: Meantime, the Big Three are back on Capitol Hill today to plead their case one more time. But even if there's a bailout, if no one's buying cars, what good will it do? Marketplace's Janet Babin reports from North Carolina Public Radio.


Janet Babin: A $25 billion bailout would help the Big Three fund their operations, but customers might still stay away. Who wants a car from a company that might not be around next year? What about your warranty, or your service center?

Susan Helper at Case Western Reserve University says that could be addressed in the bailout legislation. She says money could be put in escrow for warranty repairs:

Susan Helper: When the dealer fixes your car under warranty, the dealer could just apply to this fund for repayment, rather than to the auto maker. So that should relieve some of the concern that warranties wouldn't be honored.

Helper says after the first Chrysler bailout in 1979, the government netted a profit of more than $300 million. Even with the bailout, few consumers will have the cash, or be able to get the loans needed to buy new cars.

Helper says that's why the government has to pass a wider stimulus package. While the House considers a bailout for the Big Three, the Senate could vote on its plan as early as today.

I'm Janet Babin for Marketplace.

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