Big Three's future still in balance
Plans for lengthy plant shutdowns hint at a turning point in automaker history.
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But on Wednesday, Chrysler announced it was closing all its North American manufacturing plants for at least a month. The plants employ some 46,000 union workers. Ford announced that it would extend the holiday shutdown at 10 of its plants to three weeks, instead of the previously planned two.Skip to next paragraph
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The closures come at a time when sales of vehicles in the US are as low as at any time in the past quarter-century. Over the past three months, car and truck sales have declined at a "stunning" 43.7 annual rate, according to a Wachovia Economics Group analysis.
"The one bit of good news in these data is that the rate of decline in motor vehicle sales has clearly slowed, with the sales for motor vehicles now coming below replacement demand," concluded the Dec. 15 analysis.
Meanwhile, in Washington, an aid plan for the industry has been longer in coming than many expected. After the Senate voted down a rescue plan last week, the White House announced that it would offer some kind of aid on its own authority.
At press time, the administration had yet to release a detailed bailout strategy.
President Bush said at an appearance Thursday at the American Enterprise Institute that he had not yet decided what to do. Under normal circumstances, bankruptcy court would be the best way for auto firms to work through credit and debt restructuring. "These aren't normal circumstances. That's the problem," he said.
Mr. Bush said he was worried about the effect of an auto-industry collapse on financial markets. At the same time, he said, he was worried about throwing good government money into a bad situation.
On one matter, Bush was definite: He did not want to punt the problem to Mr. Obama. "I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.
The policy of not wanting to use taxpayer dollars to prop up enterprises that are going to collapse anyway is a good one, according to one economic expert. And that's a likely reason that an aid decision has been delayed. Government officials are poring over GM and Chrysler financial records and talking to firm stakeholders in an attempt to understand the firms' way forward.
"There is no reason to give credit if the firms have business plans you think are likely to fail. It's better to say 'no' at the outset," says Gary Burtless, a senior fellow in economic studies at the Brookings Institution.
But simply allowing GM and Chrysler to go bankrupt on their own risks their liquidation, according to Mr. Burtless. Foreign auto firms might buy some of GM and Chrysler's assets, but not all.
• Material from Associated Press was used in this report.