Fallout: The Financial Crisis

GM, Chrysler offer plan for another loan

Janet Babin Feb 18, 2009
HTML EMBED:
COPY
Fallout: The Financial Crisis

GM, Chrysler offer plan for another loan

Janet Babin Feb 18, 2009
HTML EMBED:
COPY

TEXT OF INTERVIEW

Bill Radke: Then, there’s the American auto industry to deal with. GM and Chrysler submitted their restructuring plans yesterday. GM is ready to close plants and cut a fifth of its worldwide work force this year — 47,000 jobs, gone. Chrysler will cut 3,000 jobs. And by the way, they want another $14 billion to stay in business. That’s on top of $17 billion they’ve already received in government loans.

Marketplace’s Janet Babin joins us. Janet, what are the government’s options for responding to the carmakers?

Janet Babin: Well, they can give the car companies what they’ve asked for and hope that they don’t come back with their hands out asking for even more government funds. Or they could sort of push them almost into bankruptcy here, because GM certainly will be facing bankruptcy or liquidation without these funds. And, you know, the government will have to make that decision as to how they’re going to play that.

Radke: Do you know the question the government’s asking itself about whether to let these American icon companies go bust, go the way of, you know, Circuit City?

Babin: Well, I think they have to be thinking about what’s going to cost more. Because even under a bankruptcy or liquidation, there will be costs to pay. For example, the bankruptcy would be so large that the only entity that could provide the money to finance a bankruptcy — which could cost, some say $30 billion — would be the U.S. government. And then there’s also the interconnectedness of all the other companies and industries that play off of a U.S. auto industry, you think steel and plastics. All of these industries would be affected by a bankruptcy or a liquidation of a GM or a Chrysler.

Radke: Marketplace’s Janet Babin. Thank you.

Babin: Thanks a lot.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.