For a second week, the world’s attention was focused on efforts in Washington to sustain the US automobile industry. GM and Chrysler claim they will be out of operating cash in a matter of weeks, leading to millions of layoffs and a serious deterioration of the US economic situation. The industry and its many supporters maintain that a bailout of almost any conceivable size would be cheaper than the economic havoc caused by an industry-wide collapse.
Last week, renewed Congressional hearings released a storm of what the New York Times called “pent-up anger” as the various sectors of the political and economic spectrum aired their views on this seminal issue facing the US economy this winter.
Detroit is now calling for “bridge loans” totaling $34 billion and is claiming that all will be well in 24 months so that payback can begin. An independent economist, however, testified that Detroit will need between $75 and $125 billion in loans and many more years to get back on its feet.
At week’s end it appeared that Congressional Democrats and the Bush administration had agreed on a $15 billion loan that will keep the industry functioning until the new US administration and Congress are in place. Many Congressional Republicans remain opposed to the whole concept of a federal loan to Detroit and may attempt to block action later this week.
Implicit in nearly all the Congressional testimony was the notion that the current economic problems, while serious, are cyclical and that in two or three years car sales will revive. Some knowledgeable observers say the government will have to carry the industry for six or seven years before any restructuring and new generations of fuel efficient cars can have a significant effect on sales.