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With Hat In Hand, Detroit's Big 3 Go To Capitol Hill

RENEE MONTAGNE, host:

This is Morning Edition from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning. What U.S. car companies want from you is $25 billion. They say they need it right away to survive economic trouble. And today their top executives, as well as the Auto Workers Union leader, will be asking U.S. senators to help them get the money. They'll be speaking with members of the Senate Banking Committee, and by extension you. NPR labor correspondent Frank Langfitt is with us. Frank, good morning.

FRANK LANGFITT: Good morning, Steve.

INSKEEP: If I may say, Frank, this has been discussed for some time now, this possible bailout, and there is a lot of skepticism. What else can these executives say to persuade people?

LANGFITT: Well, this is really going to be their first chance to really make a public case to Capitol Hill, and by extension taxpayers, people like you and me. And what they're going to say, first of all, I think, is, you know, this isn't our fault. These are extraordinary circumstances that no one could have predicted 12, 18 months ago because of the recession, because of the credit crunch. Last year car sales were 16 million. Next year they're going to be 12 million across the country. And that's a huge drop.

What they're going to say is, you know, we've also - we've made changes. We cut health care costs. We've got new products in the pipeline. And what they're going to basically say to people is, you know, if you can help us through difficult times, we really think we can make it. One of the lines you might also hear is, you know, the problems of Wall Street have come to Main Street.

INSKEEP: I just want to ask one thing that may have people scratching their heads. Didn't the auto industry already get $25 billion in assistance from the U.S. government not very long ago?

LANGFITT: Well, they're waiting on that money. And yes, they did. Congress did appropriate that money. But it's for fuel-efficient technology. The whole idea is to help them finance a lot of changes in their technology so they can become more competitive in the future. So it's really for long-term strategic use, not for, like, paying the monthly bills.

INSKEEP: Couldn't they just use it for paying the monthly bills if it's an emergency like this?

LANGFITT: They could, but Congress would have to change the legislation.

INSKEEP: We're talking with NPR's Frank Langfitt. He's giving us a preview of testimony before Congress of the major auto companies. That will include the CEO of General Motors, Rick Wagoner, who talked with an NBC affiliate in Detroit over the weekend, and said this.

Mr. RICK WAGONER (Chairman & CEO, General Motors): I mean, it's not one company. This is an issue of the whole auto industry. If that becomes under severe pressure, the impact on the whole economy in the U.S. will be devastating. So it's really - it's really time to move on this.

INSKEEP: So, that's Rick Wagoner's view. But Frank Langfitt, give us the facts here. How bad would it be if these loans don't come through?

LANGFITT: Well, you know, some analysts have said that it could cost three million jobs. But you know, that's if the entire industry were just to disappear tomorrow. And that's not going to happen. I mean, the auto market is down, but it's not nonexistent. And the idea of this big, big job loss seems to anticipate what we call a freefall bankruptcy where a company just stops. But history says companies generally the size of GM usually have what's called a control bankruptcy. They keep operating. They renegotiate with creditors. They don't close their doors. I mean, that's not really in anybody's interest.

Either way, most analysts say the companies need to restructure further, in bankruptcy or out. I was talking to Douglas Baird yesterday. He's a law professor at the University of Chicago. He teaches about bankruptcy. And here's how he put it.

Professor DOUGLAS BAIRD (Law, University of Chicago Law School): You can't lose such a large part of your customer base and not expect that large employment consequences are going to follow.

LANGFITT: And, you know, one of the employment consequences people say, no matter what happens, is these companies are going to have to lose about 30,000 jobs because of the way the market has fallen off. And there's no question there's going to be downstream impact, and it could be pretty big. The Detroit Three, they employ about 240,000 workers. But if you look at parts suppliers, that's around 700,000, and there's no question that they're really going to suffer too.

INSKEEP: I just want to be clear on this and on what Baird was just saying, because there was, kind of, a triple negative in that statement. He's basically saying if car sales go from 16 million a year down to 12 million a year, people are going to get fired, end of story. The government cannot prevent that.

LANGFITT: I think that's exactly what he's saying, and I haven't heard an analyst who has said anything other than that.

INSKEEP: OK, so does all of that add up to an argument against the bailout?

LANGFITT: Well, one of the things that - the argument against a bailout is that these companies caused the problem. And this is something I think you're going to hear a lot of today on Capitol Hill, that they didn't control their high labor costs earlier, and then they got caught in this recession. The other thing is I think there'll be an attack on them basing their business on SUVs. There were high profits into the 1990s, but they became very vulnerable to the gas spike. So I think that the companies have a big PR problem, and this is one of the first chances they're going to get to really try to rectify that.

INSKEEP: NPR's Frank Langfitt, thanks very much.

LANGFITT: Happy to do it, Steve. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Frank Langfitt is NPR's London correspondent. He covers the UK and Ireland, as well as stories elsewhere in Europe.
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