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Big three embrace Obama
General Motors, Ford and Chrysler look to incoming US president for industry support
11 Nov 2008
THE election of Barack Obama as the next US president has been welcomed by the country’s three struggling car-makers as they continue to pressure the government to help prevent the auto industry from collapsing.
General Motors, Ford and Chrysler are wasting no time lobbying the new Democratic administration well ahead of the official inauguration on January 21 and, in his first interview as president-elect, Mr Obama described the US car industry as “the backbone of American manufacturing”.
Speaking in Chicago on Friday (November 7), he said he has asked his transition economic advisory team to develop “additional policy options” to assist the collapsing US industry and that new ‘economic stimulus’ legislation should be enacted “sooner rather than later”.
Mr Obama vowed the latter would be the first undertaking of his administration, if it was not approved by the ‘lame-duck’ session of Congress due to begin on November 17.
In his first interview as Mr Obama’s newly appointed chief of staff, Rahm Emanuel also said car-making was an “essential” component of the US economy, but stopped short of endorsing a proposal to include US car-makers in the government’s $US700 billion fund to rescue the US finance sector.
Mr Emanuel told the ABC’s This Week program in the US on Sunday (November 9) that law-makers should accelerate the availability of $US25 billion in government loans to develop fuel-efficient cars rescue, and that “other authorities” could be employed by the new administration to aid the US industry.
“The auto industry is an essential part of our economy,” said Mr Emanuel, who added that president Obama “has asked his economic team to look at different options of what it takes to help bridge the auto industry so they are a part of not only a revived economy, but part of an energy policy going forward.” The three struggling car-makers, along with union leaders, took their pleas to Washington once again late last week, meeting with house speaker Nancy Pelosi to discuss the possibility of a second $US25 billion low-interest loan package.
President Bush (with support from Senator Obama) approved the first such loan in September – ostensibly to fund retooling for low-emission vehicles – and after the election the current administration promised to fast-track the payments.
The speaker said before last week’s meeting that she is prepared to move a ‘stimulus bill’ in Congress if both sides are prepared to support it. This could include as much as $US100 billion in immediate economic aid, say insiders, but is likely to come with strings attached such as improved fuel economy.
Democrat Senator Debbie Stabenow from Michigan – the home of the ‘Big Three’ – is confident that the Obama administration will support her constituents.
“We now have a friend of the auto industry and manufacturing in the White House,” she said after last week’s election. “President-elect Obama understands you can’t have an economy that doesn’t make things.” In the wake of the landslide victory, Washington insider and Obama supporter Roger Altman confirmed that the failures of even one of the car-makers let alone all three “would be a difficult way for a brand-new administration to take office”.
A former senior treasury official under Bill Clinton who has been engaged by GM to advise on the proposed Chrysler merger/takeover, Mr Altman said that “the consequences of a collapse by GM or all three could be very severe” for the US economy.
Another treasury heavyweight joining the push for fast action is John Snow, who worked under President Bush and is now the chairman of Cerberus Capital Management – the investment company that owns Chrysler and is pushing the GM merger deal.
“What we need is to make sure that a vital industry like autos ... which is such a big part of the overall economy, doesn’t lead us into a deeper and harsher downturn,” Mr Snow told CNBC. “The collapse of the auto industry at this time would be devastating for a new president.” A study by the Michigan-based Centre for Automotive Research suggests that about 2.5 million jobs will be lost if GM and Chrysler go bankrupt – 239,000 direct jobs, 795,000 jobs at suppliers and a further 1.4 million jobs as a trickle-down effect on the general economy.
While the Bush administration recently rejected a direct plea from GM boss Rick Wagoner for $10 billion to fund a possible merger with Chrysler, the company is reportedly hoping that a new approach will be more favourably received.
GM issued a statement after the election saying that it welcomes Senator Obama’s “pledge to support our nation’s domestic auto industry in its ongoing efforts to transform its business and develop new technologies”.
It described its current situation as a “deteriorating liquidity situation of our companies”.
GM laid the blame for its problems on the global financial crisis and said that the car industry could help rebuild the US economy.
“This support comes at an especially critical time as our industry confronts one of the most difficult economic periods in our nation’s history, caused by the global financial crisis,” the GM statement said. “And this support will enable a competitive US industry to contribute significantly to our nation’s economic revival, in employment, technology, energy security and other important areas.” GM last month posted a startling 45 per cent drop in sales and its losses are consequently mounting rapidly – industry observers suggest it has doubled to $US2 billion a month – and the company will therefore use up its $US15 billion of reserves in a matter of months, possibly triggering bankruptcy.
In what has been called the worst month of US car sales since 1945, Chrysler dropped 35 per cent in October against the same month last year while Ford lost 32 per cent.
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