Fallout: The Financial Crisis

Bailout for Big 3 hits Senate jam

Alisa Roth Dec 11, 2008
Fallout: The Financial Crisis

Bailout for Big 3 hits Senate jam

Alisa Roth Dec 11, 2008


Kai Ryssdal:
It never was a sure thing, this bailout for Detroit.
Today Senator McConnell and his colleagues made it pretty clear the only sure thing
is that the deal the White House and Congressional Democrats agreed to is not happening.
Which leaves us with these facts.
General Motors says it doesn’t have enough cash to last until New Years.
Chrysler’s almost as bad off.
Ford says it’ll need help if one of the others goes under.
So this seems like a pretty good point to ask, what happens next?
Marketplace’s Alisa Roth has more.

Alisa Roth:
The real question is how much longer the Detroit Three can hang on. And how many more ways they can think of to cut costs. Until presumably, the Obama administration comes in and bails them out.
Bruce Belzowski is at the University of Michigan’s Transportation Research Institute.
He says the timing’s actually pretty good, as these things go. Since all three are getting ready for extended holiday shutdowns anyway. That’ll save some money. After that, he says, the first step would be to get rid of research and development and focus on the here and now.

Bruce Belzowski: To make sure that you could get the product that you have available and already developed out to the dealers.

That means you keep plants running, but only very selectively.
There is another Plan B, as in bankruptcy. But Belzowski thinks that could be risky. Since they might never get out of it.
Right now, though, the bigger problem is that all the carmakers in North America — including Toyota and Honda — use many of the same suppliers.

Belzowski: If one of the major manufacturers goes out, some of its major suppliers go out as well. And then you start having some of the dealers go out because they no longer have vehicles to sell and now you’ve got a domino effect.

And once the dealers get involved, the trouble will spread well beyond Detroit.
Ron Harbour is an analyst with the consulting firm Oliver Wyman. He points out there is another possible solution.

Ron Harbour: All along, President Bush has had the ability to go ahead and sign this thing and get it done but he’s been unwilling to do that.

If the President doesn’t change his mind, and no money comes through, the Detroit Three will just have to sit tight and hope they can make it to the Obama administration.

In New York, I’m Alisa Roth for Marketplace.

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