Democratic Congress open to setting aside $25 Billion from bailout fund for automakers but the Bush administration still skeptical of providing help.
The CEOs of the Detroit 3 (General Motors, Ford and Chrysler), along with United Auto Workers President Ron Gettelfinger, will be going to Washington next week, hat in hand, and plea for a substantial bailout package.
The leading representatives of the American automotive industry will testify before the U.S. House Financial Services Committee chaired by Democratic House member Barney Frank. Their message will be simple -- help us or calamity awaits.
The Big 3 are asking for a bailout package in the form of 25 billion dollars in emergency loans to keep them afloat through next year, which will likely be one of the worst years the US automotive industry has seen since the Depression. All three Detroit automakers are burning through their cash reserves at an alarming rate as sales collapse in the US market. GM is burning about 2.3 billion a month right now. Ford lost 7.7 billion in the 3rd quarter of this year.
The Democratic Congress is warm to the idea of helping the industry. "A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened," Frank told Bloomberg TV, as quoted in a story in the Detroit News.
But the Treasury Secretary of the United States, Henry Paulson, has stuck to the Bush administrations position on the matter, which is that the automotive companies are not eligible for the bailout money since that 700 Billion dollar fund has been earmarked for financial institutions only.
The administration has continued to be skeptical of a bailout package for US automakers and it would be very difficult for the Democratic Congress to pass veto-proof legislation to help the automakers.
It was GM CEO Charles Wilson, who said back in 1955 , "What is good for GM is good for America."
It remains to be seen if the political leadership of the country believe that to be true today.