US Auto Makers Up The Ante

The so-called Big Three US auto-makers GM, Ford and Chrysler asked the US government for a $25 billion bail-out to stay afloat a fortnight ago. They met with a muted response, and were told to go away & come back this week with a concrete plan to prove that this wasn't going to be yet more money down the drain.

This week they are back. GM says it needs $18 billion, Ford $9 billion and Chrysler, the smallest, $7 billion.

Are we keeping up here 18+9+7=34. Yes, in the last fortnight things have got so bad that an extra $9 billion is now required to keep the big three afloat. Congress surely has to be asking what's changed in the last fourteen days? How do we know that you won't need another $9 billion in another couple of week's time?

After getting slated for flying in three separate corporate jets to last month's meeting, all the CEO's have adopted a more modest mode of transport this week.

GM's Wagoner is scheduled to drive to Washington in a Chevrolet Malibu hybrid vehicle. Ford's Mulally in a Ford Escape hybrid and Chrysler's Nardelli was set to leave drive in one of Chrysler's hybrid SUV's.

All three are offering a wide range of swingeing cuts, from two of them taking $1 salaries, to freezing exec bonuses, reducing white-collar staff, selling off brands and promising to get back into profitability by 2011.

There is only a narrow window for Congress to settle on any aid package for the automakers. If a deal cannot be sealed by next Friday, then they have little choice but to wait until after the new Congress is sworn in.

For GM in particular that may be too late.

Footnote: The US auto industry as a whole Tuesday reported a seasonally adjusted annual rate of sales of 10.18 million cars and trucks, the lowest level since October 1982, according to Autodata.