Congress is debating a $25 billion loan proposal to give automakers part of the $700 billion originally allotted for the mortgage and banking sectors.
“We are seeing a potential meltdown in the auto industry, with consequences that could directly impact millions of American workers and cause further devastation to our economy,” Senate Majority Leader Harry Reid said on the Senate floor.
But The White House says making the financial-rescue package available to automakers isn’t politically possible. “There aren’t the votes in the Senate” to pass the Democratic plan, White House spokeswoman Dana Perino said yesterday.
General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking aid as industry-wide sales have plummeted to a 17-year low. GM this month said it lost $4.2 billion in the third quarter and almost $73 billion since the end of 2004. The largest U.S. automaker said it may not have enough cash to get through the year. Ford lost $2.98 billion in the third quarter as sales fell 22 percent.
An estimated 2.5 million jobs could be loss if the auto industry collapses, including 1.4 million people in industries not directly tied to manufacturing, according to a Nov. 4 study by the Center for Automotive Research in Ann Arbor, Michigan. A collapse of General Motors would cost the government $200 billion in aid to states and extended unemployment benefits, said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.
So what should we do?
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