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Car makers want financial help, too
From left, Douglas Steenland, president and CEO of Northwest Airlines; Gary Cohn, co-president, managing director and COO of Goldman Sachs; and Richard Wagoner, chairman and CEO of General Motors listen during a Congressional committee meeting on Capitol Hill.
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KAI RYSSDAL: Financial institutions aren't the only companies poking around Washington looking for help. Carmakers want low-interest loan guarantees...25 billion dollars worth. They say they need them to get their factories re-tooled to build hybrids and other fuel-efficient cars. Marketplace's John Dimsdale reports 25 billion might only be the beginning.
JOHN DIMSDALE: Lobbying for government help today, General Motors CEO Richard Wagoner reminded senators they promised $25 billion in low-interest loans back when Congress raised minimum fuel economy standards.
RICHARD WAGONER: Since the bill was passed last year, the capital market conditions have worsened significantly. So the ability to fund these investments from our normal cash flow from our business is significantly retarded.
Companies say private lenders are demanding 20 interest rates since prospects for profits are so dim. So car makers want government loans of four or five percent. David Cole, chairman of the Center for Automotive Research, says those loans are needed to avoid unemployment that could spread in industries from steel to car parts.
DAVID COLE: A serious failure of a Ford or GM or even Chrysler could precipitate a much more serious problem. It's probably less expensive to do something preemptively than to wait and try to clean up a big mess.
Car makers point to a government loan to Chrysler 30 years ago which the company paid back. But J.D. Foster at the Heritage Foundation says the government has no role in propping up failing businesses.
J.D. FOSTER: They have a cost structure that simply is uncompetitive. They have to get that under control. They shouldn't do that on the backs of taxpayers. They should do that on the backs of their shareholders.
Congress is likely to OK the $25 billion this month. After all, what politician wants more layoffs in the swing states of Michigan and Ohio?
In Washington, I'm John Dimsdale for Marketplace.
It's not about waht is good for industry or for the workers. That's just a smoke screen. Car makers will get what ever they want as long as they kick back a portion to the politicans in form of gifts, donations and junkets. GM and Ford will get their 25 billion and then the top executives will enrich themselves with more bonuses for the great job they did in acquiring new financing.
Regarding J.D.Foster's comment that government has no role in propping up failing businesses. Now, stay with me a minute here. Bear Stearns is a business and has stockholders, right? Lehmen Brothers is a business and has stockholders, right? GM and Ford are businesses and have stockholders .. and a lot of blue collar workers whose jobs have been going overseas, right? So what's the big picture here? And how is it that it's OK to continue subsidies to the corn ethanol industry and for McCain to propose injecting $350B into the nuclear industry, which has been in the doldrums for several years now? Something is badly broken.
