CAW's Hargrove says loan guarantees "critical"
DETROIT (Reuters) - U.S. automakers face failure if they do not get $25 billion in low-cost federal loans for the auto industry, former Canadian Auto Workers union president Buzz Hargrove said on Wednesday.
"It's critical that the industry get them," Hargrove told the Reuters Auto Summit. "You can't continue to lose billions of dollars, lose market share, lose sales, and find the money to do what consumers are demanding, which is fuel efficient vehicles."
U.S. automakers and suppliers have been lobbying Congress to approve funding necessary for the industry to access up to $25 billion of low-interest loans for new fuel-saving technologies.
The framework for that loan program was included in last year's energy law that also set a large increase in U.S. fuel economy targets.
Hargrove, who stepped down earlier this month after 16 years as CAW president, said the Canadian government also needs to work on a long-term policy to preserve manufacturing jobs and extend loan guarantees to the auto industry of about $3 billion to $6 billion.
U.S. automakers -- General Motors Corp (GM.N), Ford Motor Co (F.N) and Chrysler LLC -- have been hit hard by the sharp decline in sales of pickups trucks, SUVs and vans that followed the rise in gas prices this year.
All three automakers are facing pressure to shore up cash to ride out a deep downturn in U.S. auto sales, which are near 15-year lows, with most analysts forecasting a rebound only in 2010.
"GM, Ford and Chrysler -- especially Chrysler today and GM, Ford tomorrow -- cannot survive in the current structure they have," Hargrove said.
A failure of any one of three Detroit-based automakers would have a disastrous effect on the economies of the U.S. and Canada, he added.
The U.S. government loan program for the auto industry has run into some opposition from critics, who call it a bailout for the auto industry.
Hargrove's comments come as U.S. consumers were grappling with the turmoil in the financial markets. The stock market on Wednesday was hit again with sharp losses as investors were not reassured by the rescue of insurer American International Group (AIG.N) by the U.S. Federal Reserve.
"The collapse of the major finance companies, it means less money is going to be available now for people and so sales are going to continue to go down," he said.
Chrysler is the weakest among the three U.S. automakers, Hargrove said.
"Chrysler has the largest portion of large vehicles that have taken the biggest hit in terms of both sales overall, but the shift of consumers to smaller vehicle has a bigger impact on Chrysler than anybody else," Hargrove said.
"I don't think GM and Ford are that much further behind," he said.
A Chrysler representative could not be immediately reached for comment. Chrysler Vice Chairman Jim Press said last week that the automaker was meeting its internal financial targets for 2008.
The company, which has released limited financial data since Cerberus Capital Management CBS.UL bought it from Daimler AG (DAIGn.DE) about a year ago, ended June with $11.7 billion in cash and had earnings before interest, tax, depreciation and amortization of $1.1 billion in the first half of the year.
(For summit blog: summitnotebook.reuters.com/)
(Editing by Phil Berlowitz)
- Tweet this
- Share this
- Digg this