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| Speaker of Congress Nancy Pelosi meets with former Vice President Al Gore to discuss global warming. |
Speaker of the US Congress Nancy Pelosi, on Tuesday called for emergency support for the embattled US car industry on a day when shares in General Motors plunged to a 65-year low of $2.92. GM revealed in a regulatory filing that its “ability to continue as a going concern” is in substantial doubt because it may run out of money by the end of the year.
GM’s stock fell for a fifth consecutive day and the market value fell to about $1.7 billion - - a more than 90% decline from a year ago.
The prospect of a federal bailout has sent investors scurrying for the exits on fear of a massive dilution of shareholdings.
US car makers sold 838,186 cars and light trucks in October according to industry research firm Autodata.
"We estimate that industry is going to come in at about 865,000 units, which is a 10.8 million seasonally adjusted annual rate," General Motors analyst Michael DiGiovanni said. "This will be the lowest industry in terms of seasonally adjusted annual rate for any months since 1982."
When adjusted for increases in the US population, last month was "the worst month in the post-World War II era," DiGiovanni said in a conference call last week. "This is clearly a severe, severe recession."
The annual rate 10.6 million vehicles, compared with 16 million a year earlier, according to Autodata.
GM reported a 45% drop in its US sales for October.
Ford Motor October sales fell 30%.
Following the $150 billion bailout of insurance giant AIG, President-elect Obama and the Democratic Party in Congress see a stronger case to support the ailing car industry, which employs 732,000 Americans.
The Oregonian newspaper wrote on Tuesday:"...if it makes sense to throw $150 billion at an insurance company that woefully underestimated the financial risks it was taking, how is it not sensible to throw a much smaller amount to an industry that, by its own admission, must make up for its own squandered opportunities? At the very least, a far greater number of Americans would benefit directly and immediately from the federal intervention.
That's not to say that the auto industry should emerge unscathed from the troubles swamping the U.S. economy. It's not obvious, for example, that saving Chrysler temporarily would ultimately benefit the industry. It may make more sense for Ford or General Motors to buy Jeep and the Dodge minivan lines, for example, than to yoke two struggling companies together.
Yet it's enormously risky to kiss off an entire industry that provides living-wage jobs and benefits to hundreds of thousands of Americans, not to mention billions of dollars in tax receipts to the government. How can we as a nation contemplate that?"
GM ended the third quarter with $16.2 billion in available cash. The company estimates it needs a minimum of $11 billion at any time to pay its bills.
At its current rate of cash burning, GM will have less than $10 billion by the end of the year and the company estimates that it needs a minimum of $11 billion at any time to pay its bills.
The three big US companies are reported to be seeking an additional $50 billion in federal loans.
The failure of ``one or more of the major American automobile manufacturers'' would have a ``devastating impact on our economy,'' Speaker Pelosi said in a statement
Former Vice-President Al Gore, said in a New York Times article last Sunday:"...we should help America’s automobile industry (not only the Big Three but the innovative new startup companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available as the rest of this plan matures. In combination with the unified grid, a nationwide fleet of plug-in hybrids would also help to solve the problem of electricity storage. Think about it: with this sort of grid, cars could be charged during off-peak energy-use hours; during peak hours, when fewer cars are on the road, they could contribute their electricity back into the national grid."
``The financial situation facing the Big Three is not a national problem, but their problem,'' Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, said in a statement. ``I do not support the use of US taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes.''
Last month, Prof. Peter Morici of the University of Maryland, said on Finfacts: "The simple fact is that the best solution for Chrysler is Chapter 11 to remove the burdens of the UAW (the industry trade union) contract and scale down the company to something one half to two thirds its current size. That would serve GM’s interests too—both Ford and GM would benefit from some capacity and cars going off the market."
Morici said in relation to financing a tie-up between GM and Chrysler: "Suggestions are emerging that Uncle Sam take a stake in the combined company. So rewarding two of the worst run companies on the planet makes little sense to me."
In 1955, the then Chairman and CEO of GM, Charlie Wilson, said: "What is good for General Motors is good for America."
General Motors Corp. , the world’s largest carmaker, has been the annual global industry sales leader for 77 years. Founded in 1908, GM today employs about 266,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 34 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.
Speaker Nancy Pelosi on Tuesday issued the following statement today on the need for Congress to craft legislation to provide emergency and limited financial assistance to the automobile industry under the Emergency Economic Stabilization Act (EESA - - the $700 billion bailout of the financial service industry).
"In order to prevent the failure of one or more of the major American automobile manufacturers, which would have a devastating impact on our economy, particularly on the men and women who work in that industry, Congress and the Bush Administration must take immediate action.
"I have asked Chairman Barney Frank of the House Financial Services Committee to work with House and Senate leaders, and with the Bush Administration, to craft legislation to provide emergency and limited financial assistance to the automobile industry under the Emergency Economic Stabilization Act (EESA).
"Emergency assistance to the automobile industry would be conditioned on executive compensation restrictions, a prohibition on golden parachutes, rigorous independent oversight, and other taxpayer protections to ensure that any companies that benefit from this assistance – and not the taxpayers – bear the full burden of repaying any costs that are incurred.
"It is essential for the domestic automobile manufacturing industry to re-emerge as a global, competitive leader in fuel efficiency and in new, path-breaking energy-efficient technologies that protect our environment. For the automobile industry to be truly viable, it must continue to move in this direction. I am confident Congress can consider emergency assistance legislation next week during a lame-duck session, and I hope the Bush Administration would support it."
