Time to Help Detroit Automakers

The Center for American Progress Action Fund calls for a $25 billion bridge loan to U.S. automakers, but with stringent conditions.

We urge you to support legislation to grant a $25 billion bridge loan to the U.S. auto companies to ensure that they avoid bankruptcy. The auto industry is suffering from an extended, steep sales slump due in part to the credit crunch. That’s why U.S. automakers require immediate stabilization. The auto industry is a bedrock of our economy, with one in ten American jobs related to auto manufacturing. Its survival is essential for the future of advanced clean-vehicle and alternative-energy automotive manufacturing. What’s more, this assistance is imperative to preserve jobs.

The collapse of any or all of the Big Three—General Motors Corp, Ford Motor Co., or Chrysler LLC—would devastate an already weakened economy. The Center for Automotive Research predicts that “the impact on the U.S. economy would be substantial were all—or even half—of the three Detroit-based automotive manufacturers’ U.S. facilities to cease operations… Nearly 3 million jobs would be lost in the first year if there is a 100 percent reduction in Detroit Three U.S. operations.” The federal government cannot allow this to occur when employment has already decreased by 240,000 jobs between September and October 2008, and more job cuts are likely in the coming months. Massive layoffs due to the collapse of these companies would also exacerbate the collapse of consumption that is devastating the economy.

Support for the loan condones neither the flawed management at the top of General Motors, Ford, and Chrysler nor their commitment to the sale of gas guzzlers and longstanding opposition to more efficient fuel economy standards. Senior management at the three companies based their business model on a future of cheap oil, despite multiple warnings that such a strategy was unsustainable. Nonetheless, the high costs of the collapse of any of these companies would be paid for by the hardworking men and women employed by the auto companies and related industries. These laborers and their families should not be punished for the failure of the companies’ leaders.

To ensure that the managers who helped create this mess are not unduly rewarded, the loans must disallow excessive executive compensation. In addition, the auto companies must fulfill their commitments to provide both health care and retirement security for their employees and retirees. The companies must commit to continue their research and development of advanced, clean-vehicle technology and energy efficient manufacturing. A loan oversight board should ensure the companies develop a long-term business plan based on the production and sale of fuel-efficient vehicles.

The auto companies should embrace—not resist—the transition to less polluting vehicles. They should assure Congress that they will cease their legal and lobbying opposition to the imminent new fuel economy standards, and the California motor vehicle greenhouse gas standards that President-elect Obama said he would allow. These measures will reduce oil dependence, increase national security, save families money, and reduce pollution. In addition to harming the nation, continued opposition to these standards would keep the companies on the path that got them in this mess in the first place.

Please support the $25 billion loan for U.S. auto companies and include the aforementioned safeguards. This will help protect American jobs and ensure progress toward significantly more efficient vehicles. Thank you.


Winnie Stachelberg Daniel J. Weiss

Senior Vice President for External Affairs Senior Fellow & Director of Climate Strategy

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