The bailed out GM vs. the failed one
With the debate about bailing out GM reaching a fevered pitch, Ashley Milne-Tyte asks, what a GM rescue plan would look like and what would actually happen if the giant automaker failed.
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KAI RYSSDAL: Henry Paulson clearly had a lot on his mind this morning. His press conference went for more than an hour. He said he thinks, all in all, the government’s been moving pretty fast in this crisis. He said he’s pretty confident $700 billion should be enough to do what needs to be done. And he said he’s not eager to give any of that money to car makers. House Speaker Nancy Pelosi and President-elect Obama feel otherwise.
From New York, Ashley Milne-Tyte reports on what a Detroit bailout might look like if it comes to pass. And what might happen if it didn’t.
ASHLEY MILNE-TYTE: U.S. car sales are down about 50 percent over last year.
Michael Robinet is vice president of global vehicle forecasts for CSM Worldwide. He says the government has to bail out the auto industry. He says if GM failed, consider the ripple effects, starting with a supplier of parts to GM.
MICHAEL ROBINET: They would have a problem in the sense that some of their supply to GM helped cover their burden, their fixed costs, and therefore that really questions their ability to continue to supply a Chrysler or a Honda or a Toyota.
And if those automakers have trouble getting supplies it’ll make it much tougher to stay in business. Also, he says every town with a GM auto dealership would see its economy suffer.
Jon Blank is a senior industry strategist at Decision Economics. He says there’s no good answer.
JON BLANK: What do you do? If you don’t bail them out, they disappear or they go into a restructuring that, hard to say how they emerge in a competitive framework where bankruptcy goes on for a year or two.
He says a bailout even for two years would cost about $120 billion.
BLANK: That number, does that sound really repulsive? Well, I mean, we’ve done basically the same number for AIG, right?
Of course, Blank says, the government could be faced with every other struggling industry asking for the same deal. But he says it’s hard to think of having no U.S. car makers left.
In New York, I’m Ashley Milne-Tyte for Marketplace.