It finally looks like the Detroit Three – Ford, GM and Chrysler – will get their rescue loans from the US Government. But they had to sweat for the money.
Over the past couple of days the Detroit bosses have had to present detailed business plans to Federal Committees. In GM’s case, the plan involves laying off 30,000 more workers, shutting plants, and off-loading or closing Saab and Pontiac.
The boss Rick Wagoner will get a dollar a year until it’s turned around. And he won’t quite be the boss any more because he’s accepted the need for some sort of Government appointed ‘car czar’ to oversee the spending of the loans.
At first it all looked like typical political brinkmanship. All parts of the political spectrum took firm positions. Some didn’t want a bail-out at all. Some, including President Bush, wanted the money to come from cash already allocated for green car technologies. Democrats wanted the cash to come from the $700bn bank bail-out fund. Eventually the Democrats seem to have been flexible, but we haven’t seen the detail yet.
The plan is for a bill to be drawn up next week, so the final scheme could be signed off within days. Just as well. GM says it needs billions by Christmas.
In the end though, the fact that the matter has been so widely discussed is a good thing. The American political class now knows GM and Ford are serious (I don’t believe Chrysler will last). The car makers have really had to boil down their strategies. The American public have been reminded that the economy needs industry. The Japanese and German carbuilders in America know they can’t survive if Detroit’s suppliers go under. The car unions understand they’ll have to make sacrifices too.
Such rigorous discussion has to be good. Two weeks ago the US Treasury approved loan guarantees of $306bn for the bank CitiGroup, without any banking executives having to stand up and account for themselves or present a plan.