Mounting auto industry losses prompt push for federal bailout
DETROIT -- The press for a federal bailout of the auto industry increased over the weekend.
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., said in a letter to Treasury Secretary Henry Paulson that the Bush administration should consider expanding the $700 billion financial rescue to include car companies.
"A healthy automobile manufacturing sector is essential to the restoration of financial market stability," they wrote.
The administration did not directly comment on the request to tap the TARP (Trouble Asset Relief Program). But Treasury spokeswoman Jennifer Zuccarelli says, "We continue to work on a strategy that most effectively deploys the remaining funds to strengthen the financial system and get lending going again."
Automakers already want an additional $50 billion in federal loans, and top auto company and union executives met with congressional leaders Thursday.
Ford Motor also reported earnings and, while its situation appears less dire, it also is making a case for government help.
GM said it will nearly exhaust its cash cushion by year's end, leaving barely enough for day-to-day operations through the first half of 2009. It said it has ended merger talks with Chrysler, delayed future product plans and cut benefits. But it said those measures may not be enough.
"Even with its planned actions, the company's estimated liquidity will fall significantly short of (needed cash minimums) unless economic and automotive industry conditions significantly improve," GM said at the end of its third-quarter earnings report.
President-elect Barack Obama, standing on stage with Michigan Gov. Jennifer Granholm, said at an event Friday that he favors helping the automakers, naming it his second economic priority.
GM reported a $2.5 billion loss for the third quarter, and so far this year has lost $21.3 billion. More ominously, the automaker burned through $4.8 billion in the third quarter, and has about $16.2 billion in gross cash. It needs a minimum of $11 billion to $14 billion on hand to operate.
