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Automakers might get short-term help to stay afloat

BY TOM INCANTALUPO | tom.incantalupo@newsday.com

11:22 PM EST, December 12, 2008

The Bush administration signaled Friday that it might provide a financial reprieve for the struggling Detroit carmakers by tapping the Troubled Asset Relief Program, the $700-billion fund created in October to help save the financial industry from default.

The money, if it comes, is expected to be in the form of bridge loans to delay bankruptcy filings by General Motors and Chrysler, both of which are within a month of running out of cash to pay bills. It would leave to the new Congress and the Obama administration the decision on whether to provide longer term help for Detroit's Big Three, who have struggled for decades with declining market share and high costs.

Ford, while facing the same generic problems, has said it has sufficient cash reserves for the near future.

Senate Banking Committee chairman Christopher Dodd (D-Conn.) told reporters Friday that a commitment from the administration could come during the weekend.

Bloomberg News, citing an unnamed source, reported early Friday evening that GM chief executive Rick Wagoner spoke by telephone with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term rescue plan.

"I don't think the last thing Bush wants to see on his way out the door is the Big Three going bankrupt," said auto analyst Steven Spivey of the Frost & Sullivan consulting firm.

Locally, the Greater New York Automobile Dealers Association urged the administration and Congress to act. "It's a shame to see lawmakers playing politics with people's lives and jobs," group president Mark Schienberg said in a statement.

Word from the White House came a few hours after a plan to provide $14 billion in government loans fell apart amid strong, largely Republican, opposition in the U.S. Senate. The House of Representatives approved the plan Wednesday.

The administration had opposed using TARP money to help the automakers, but White House spokeswoman Dana Perino said, "The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry."

Treasury spokeswoman Brookly McLaughlin said, "Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."

A key issue Thursday night was whether the United Auto Workers union members should take an almost immediate cut in wages and benefits - something on which some Republican senators insisted. While GM and Ford say their hourly assembly workers are paid in the same range as those building cars for Japanese automakers in the United States - about $30 an hour - a better package of medical benefits before and after retirement, coupled with pension costs for huge numbers of retirees - 432,000 for GM alone - increases total labor costs to about $70 an hour for GM and Ford, compared with about $50 for workers making Japanese nameplates.

"It's not wages that are the problem," said Kevin Tynan, senior auto analyst at Argus Research in Manhattan. "It's the legacy costs - pensions and health care."

GM, Ford and Chrysler directly employ nearly 250,000 Americans and, overall, the auto industry accounts for roughly 5 million U.S. jobs and 4 percent of gross domestic product.

In Riverhead, dealer Mark Calisi, who sells Chevrolets, Jeeps and Chryslers at his Eagle Auto Mall, says sales are off by 50 percent this month from a year ago and that even customers with high credit scores are having difficulty getting financing. "This is probably one of the worst months in the history of the dealership - 14 years," he said.

This story was supplemented with reports from The Associated Press, Reuters and Bloomberg News.