Big Three losers seek investment, not bailout
Ford Motor Co. posted a loss of $8.7 billion in the second quarter, and General Motors Corp. (GM) reported a $15.5 billion loss over the same period. Chrysler LLC is a privately owned company and does not have to report its results, but Chrysler's U.S. sales are down 22% so far this year, more than double the decline seen by the rest of the industry.
The three companies are pushing hard for billions of dollars in low-cost government loans to retool their operations to produce smaller vehicles and hybrid and electric cars. The Big Three see their locations in the battleground states in the presidential election as being advantageous.
President George W. Bush, last year, signed a bill authorizing $25 billion in low-interest loans to help GM, Ford, and Cerberus Capital Management LP's Chrysler retool plants to produce small, fuel-efficient vehicles. Congress still needs to appropriate $3.75 billion to get the program off the ground, and it will have an opportunity to do so before the election in November.
The measure could rise up Congress' priority list since both the Republicans and Democrats are scrambling to win votes in Michigan, Ohio, Indiana, and other states home to Big Three auto plants.
Sen. Debbie Stabenow, the Michigan Democrat, said she would support increasing a federal loan program for the auto industry to $50 billion. GM, Ford, and Chrysler said they would appeal to Congress to increase the size of the loan facility.
Since the $25 billion loan program became law last year, the fortunes of all three companies have worsened significantly amid a steep drop in vehicle sales and a shift by consumers to small cars and away from the trucks and sports-utility vehicles that generate a big chunk of Detroit's revenue.
Stabenow said the loans represent an investment in the next generation of vehicles using alternative sources of energy for fuel, not a bailout for troubled automakers. She said other countries including China, Germany, Japan, and South Korea were investing heavily in their car companies, and if the U.S. wanted to remain competitive, it would have to do the same.