Failure in the Auto Industry Could Affect 13 Million Jobs

Automakers plead for $25B bailout, which critics say is undeserved.

November 18, 2008, 8:37 AM

Nov. 18, 2008 — -- Despite widespread criticism that Detroit automakers had been making poor business decisions for years leading up to the current auto industry crisis, Ford Motor Co. never saw it coming, Ford president and CEO Alan Mulally said today.

"If everybody can remember, we had gotten back to profitability in the first quarter of this year," Mulally told "Good Morning America."

"And then, the world, for all of us, came undone with the slowing economy and the banking and credit crisis. None of us ever anticipated we'd be in a world where our sales for the industry have fallen off 45 percent in the first nine months."

To rebuild their world, three major automakers are in Washington today to plead for a $25 billion rescue plan -- a plan they believe could prevent millions of jobs from being lost.

The Big Three automakers -- Ford, General Motors and Chrysler -- employ about 240,000 workers. An additional 2.3 million Americans, or 2 percent of the nation's work force, have jobs in related supply industries. Beyond that are the jobs in communities that depend on auto factories to survive, including waiters, retailers and doctors -- roughly 13 million jobs from coast to coast.

To help save those jobs, House Speaker Nancy Pelosi has said House leaders will secure aid "to ensure [the auto industry's] economic viability," much to the chagrin of some financial experts.

"The problems have been festering a long time," Paul Ingrassia, a former Detroit bureau chief of the Wall Street Journal who teaches journalism at Columbia University, told "Good Morning America." They certainly didn't just crop up with the economic crisis and the financial crisis the country has had since last summer."

Even as the economy was booming in 2005 and 2006, GM was posting record losses as gas-guzzling sport utility vehicles and trucks were falling out of favor.

"Taxpayers should never be on the line to bail out private companies," said Daniel Ikenson of the Cato Institute, a nonpartisan, libertarian think tank headquartered in Washington, D.C.. "They should most emphatically not be bailing out companies that have made very bad decisions."

Ford's Mulally said his company is addressing the change in demand by converting one of its truck factories to car production "for one of our fuel-efficient vehicles."

"Clearly, the Ford Motor Co. has been on a plan to transform our business," he said. "It's going to be really neat to be able to explain and talk about the progress we've made transforming our Ford for the future."

If the government denies the rescue plan, one option that some experts support is bankruptcy for the major auto companies.

For Ford, Mulally said, bankruptcy is not a viable option.

"We have been restructuring and it really doesn't work for us to go into bankruptcy because, clearly, the consumers have choices," he said. "I don't think they're going to buy from a company that's in bankruptcy."