Congress has opened for Detroit's automakers a narrow path to the financial bailout they say is essential to their survival. The Big Three now have 11 days to put together convincing arguments that the federal aid will bridge them across this crisis.
We urge the companies to sharpen their political skills and make a better showing when they return to Congress on Dec. 2. We also caution lawmakers to consider carefully the broader impact of a collapse of the domestic automotive industry.
With the economy teetering on the brink, Congress can't afford to roll the dice.
There can be no doubt that rescuing the automakers is a key to heading off a deep recession.
The auto companies are burning through their cash reserves and need the money from Congress to tide them over until new contracts that reduce their costs kick in and credit markets rebound.
Sen. Carl Levin and his Michigan colleague Debbie Stabenow and GOP senators from the auto-producing states of Ohio and Missouri have come up with a plan to use $25 billion that has already been promised to the auto companies for retooling their plants to solve the cash flow problems.
But others in Congress have balked, saying those funds should be preserved for making the industry more environmentally friendly. If one or more of the domestic auto firms fails for want of cash, however, Congress' good environmental intentions won't count for much.
The collapse of the domestic auto producers could mean a 4 percent reduction in the nation's $14.5 trillion gross domestic product, assuring a severe and lengthy economic downturn.
Auto manufacturing and related businesses employ 3.1 million workers across the nation, with each direct job producing five additional jobs, according to Sean McAlinden of the Center for Automotive Research in Ann Arbor, Mich.
Bankruptcy of the Detroit Three would have a ripple effect throughout an economy coping with the bursting of the housing bubble and shaky financial institutions.
To be sure, the auto executives who argued their case before members of Congress this week could have been more politically attuned.
Congress has asked the automakers for a business plan showing how they would use the money to remain viable. The compromise worked out by Levin, Stabenow and the others already contains taxpayer safeguards, including stock warrants, for the government and limitations on executive compensation.
What is imperiling the automaker's survival now is the mulishness of a Congress that has already agreed on a $700 billion cash infusion for the financial industry, but whose members — and the Bush administration — don't want to use any of that money for the auto industry.
But Levin brought the matter into focus when he noted the argument in Congress is whether to give an immediate loan to the auto industry out of one pot of already appropriated money or another pot of already appropriated cash.
Is this argument really worth the destruction of thousands of additional jobs?
Congress has put the question off for a couple of weeks. But it owes the nation the right answer when it returns.
REPRINTED FROM THE DETROIT NEWS.
DISTRIBUTED BY CREATORS SYNDICATE, INC.
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