By Courtney Ann Jackson-Talk Radio News Service
Senator John McCain (R-Ariz.) comments on how he believes it’s “beyond belief” that the federal government is running General Motors and Chrysler. He said he believes they will go back into bankruptcy within 2 to 3 years. (0:25)
Russell Whatley, a Chrysler dealer from Texas, testified before the Senate Committee on Commerce, Science, and Transportation that he was given 26 days by Chrysler to sell his inventory. He went on to comment that such an action would be impossible (0:28)
By Michael Combier-Talk Radio News Service
At a press conference this morning, President Barack Obama announced that 31 days after having filled Chapter 11 bankruptcy, a new Chrysler will emerge in the coming days. President Obama added that bankruptcy has been the best solution for the auto maker and that the American people have been comforted by “this extraordinary commitment to stand behind a quick bankruptcy process.” (1:15)
By Suzia van Swol, University of New Mexico, Talk Radio News Service
U.S. Small Business Administration announced that it will expand eligibility for loans, planning a move to make more than 70,000 additional small businesses and auto dealerships eligible for these loans. The program should go into effect early next week through Sept. 30, 2010. Businesses will qualify based on net worth and average income. Net worth is not to exceed $8.5 million and after taxes cannot exceed more than $3 million for the two preceding years.
The SBA has taken these types of actions in the past during difficult economic times, such as in 1993 when small businesses also took a hit under the administration of George H.W. Bush.
The new plan with help unlock financing for those who want to buy and sell cars. Brian Deese, Economic Advisor to President Obama said that the administration are excited to announce that General Motors Acceptance Corporation has reached an agreement with Chrysler to provide them with auto financing. In turn GMAC will receive capital from the government. “This step taken today could more than double the number of dealers, auto-dealers, eligible for the SBA-7A loan program which is a really important expansion at a time when dealers when the industry overall is going through a very difficult restructuring process,” said Deese.
By Suzia van Swol, University of New Mexico-Talk Radio News Service
One-time giant Chrysler filed for bankruptcy protection today, but President Obama says he has every confidence it will emerge from this process stronger and more competitive.
After speaking with the President today, U.S. Rep. Marcy Kaptur (D-OH) said that the auto industry is important to the U.S. defense industrial base and the economic power of Northern Ohio. “Most important are the 30,000 jobs saved at Chrysler,” said Kaptur.
Kaptur said that the auto industry was brought down by Wall Street and it deserves to flourish. “The government will stand behind the working capital for Chrysler in the form of working capital and loans,” said Kaptur.
Striking comparison with other bailouts, Kaptur said that if you look at who got the big money, “the AIG gets 70 billion, one company?” She went on to say that TARP should have been opened up for vehicle sales
and for the financing of dealership showroom floors. Instead, there was a total credit strangle hold, which still is impacting this industry, and unemployment started to tick up all across the country.
The federal bankruptcy court will ultimately determine Chrysler’s immediate future, but Jeeps might still get a chance to four-wheel over mountains.
Brett Littlefield, Director of Communications at the American Conservative Union, believes the Senate made the right decision in not passing the automobile bailout package. (0:22)
Jim Press, President and Vice Chairman of Chrysler LLC defends the integrity of his company. (0:52)
Chrysler LLC held a rally at an auto dealership in support of their proposed automaker bridge loans. The rally was attended by people affected by the entire auto industry, from the president of Chrysler, to dealers, industry partners, and local businessmen who are dependent on customers that dealers bring to their area.
“We sell an average of 25,000 cars a year to Marlyand residents. The sales tax alone generated on these vehicles over $30 million a year,” said Tammy Darvish of the Darcars Automotive Group, a car dealership group in Maryland and Northern Virginia. “We have 233 local businesses and vendors with whom we do over $83 million a year of business with…these are examples of where the pain would really be felt if manufacturers who provide us vehicles were not provided the much-needed support from Congress.” Darvish emphasized that communities and stories like hers can be told across the country. “We are the backbone of the American economy, and there is no other industry stronger or more united in good times or in bad times than all of us automotive dealers here today,” said Darvish.
This rally isn’t about “Wall Street or board rooms…this is main street, this is jobs, this is preserving our way of life,” said Jim Press, Vice Chairman and President of Chrysler. “This isn’t a business of a couple people flying around on jets,” said Press, “Chrysler is…a company that has made the way of life we enjoy.” Press said that if one of the automaker companies went under, it would have a ripple effect throughout the entire economy. “I flew Southwest to come here, I took the train from Philadelphia…I’m in a town-and-country van to go to Washington,” said Press.
Representatives from the flailing Big Three automakers appeared before the Senate Banking, Housing and Urban Affairs Committee Tuesday to make their case for receiving a 25 billion dollar bailout.
Alan Mulally, president and CEO of the Ford Motor Company; Robert Nardelli, chairman and CEO of Chrysler LLC, and Richard Wagoner Jr., chairman and CEO of General Motors explained that if they were to fail, there would be millions of lost jobs across the entire spectrum of the automobile industry, from those in manufacturing positions to those who work in dealerships.
While the committee members’ opinions about the bailout were mixed, the sense of cautious doubt seemed unanimous.
“Let me say what I have said previously: I support efforts to assist the industry. Not because their leaders necessarily deserve taxpayer’s help. On the contrary, they deserve no more help than do the leaders of the financial companies that created the subprime mortgage mess that has exploded into a global financial crisis,” said Chairman Chris Dodd (D-Conn.)
Dodd asserted that the blame for the Big Three’s dilemma rested on the CEO’s themselves.
“None of us relishes being here today to consider these prospects. That goes for our company and labor witnesses. Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact that they are seeking treatment for wounds that I believe are to a large extent self-inflected,” said Dodd.
However, the Big Three disagreed that they should be held responsible, with the Ford and GM CEOs saying that their companies were headed towards profits until the credit crisis hit. The result was that the consumers ability to buy cars was severely impacted and gains quickly dropped.
The automakers also rejected the notion that they have not been innovative and have been refusing to make needed changes. All three companies have begun the creation of hybrid vehicles and have made attempts to reach more effective labor costs.
The CEOs flatly disagreed with suggestions that they declare Chapter 11, citing that there would be no real benefit since the restructuring that would come with a bankruptcy declaration was already being attempted. This would be coupled with the companies supposed inability to maintain liquidity on remaining products, since they contended that few consumers would purchase a product from a folding company. Mulally also stated that Ford still owed wages to workers that would be lost if the company declared Chapter 11.
An additional witness, Peter Morici; economist and professor at the University of Maryland School of Business, disagreed and said that Chapter 11 was a viable option.
“If Chapter 11 is put off, the successors to GM, Ford and Chrysler that emerge from a bankruptcy reorganization process will be smaller and support fewer jobs than if these companies endure this difficult transition in 2009. More jobs can be saved among GM, Ford and Chrysler and their suppliers if bankruptcy reorganization is endured now than in the future.”
U.S. Chamber of Commerce Executive Vice President and Chief Operating Officer David Chavern expresses the USCC’s stance on the current TARP financing being proposed by Congress for the auto industry.
