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Do automakers need more help?

A California traffic jam

TEXT OF STORY

Bill Radke: Automakers are really hurting. Billionaire Kirk Kerkorian sold off part of his stake in Ford, and other investors followed his lead. Chrysler and GM are talking merger, but financing that deal won't be easy. Yesterday, Michigan's congressional delegation asked the federal government to help Detroit's car makers and lenders. Which brings up that word again: bailout. Marketplace's Jeremy Hobson reports.


Jeremy Hobson: The auto industry already got help from Washington this year in the form of $25 billion in loan guarantees. Still, in an interview with CNBC last week, Chrysler CEO Robert Nardelli was asked straight up: Do the automakers need more?

Robert Nardelli: Well I mean, I think that remains to be seen. We're doing everything we know how to do.

Nardelli wouldn't comment on a possible merger with GM. But Jesse Toprak, an industry analyst at Edmunds.com, says consolidation won't get the auto industry out of its current jam.

Jesse Toprak: Any kind of collaborations in the short term actually costs more money sometimes. Because you have to eliminate dealerships, you have to eliminate jobs, and in the short term that means a lot of cash outflow.

So is more government intervention needed?

David Cole is chairman of the Center for Automotive Research. He says allowing any of the big three to fail would be far worse than propping up the industry with taxpayer dollars.

David Cole: You know, an ounce of prevention is worth a pound of cure.

Cole says job losses in Detroit could cascade to dealerships and suppliers. And he says a major failure would likely lead to more than a million layoffs nationwide. Cole claims cost-cutting and the falling price of oil have put the industry on the threshold of a golden era. If only private investors weren't so scared.

In New York, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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