December 4th, 2008
11:40 AM ET

Where the rubber meets the road – Automakers, welcome back to Congress

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Andrew Torgan
CNN Financial News Producer

The CEOs of General Motors, Ford and Chrysler are back on Capitol Hill this morning, explaining why they believe their companies should get federal assistance. Each of the companies unveiled plans Tuesday that detailed how they would plan to return to profitability if they get federal loans. They also upped the amount they are seeking from $25 billion to as much as $34 billion

If you opened the New York Times this morning you might have noticed a full-page ad taken out by the United Auto Workers Union with the message: "We are not bankers." The ad goes on to say "We don't work on Wall Street or for big insurance companies. We build quality cars and trucks. But we've been hit with the same financial crisis." It goes on to talk about how many thousands of other businesses would collapse and millions of other workers that would lose their jobs if the Big Three go under. Check out CNNMoney.com's report: "Who Can Save Detroit?"

Lots of job cuts announced this morning – more than 22,000 of them. AT&T is cutting 12,000 – or 4% of its total workforce. Entertainment giant Viacom is cutting 850 jobs. Swiss Bank Credit Suisse is cutting 5,300 jobs. Money manager State Street is cutting up to 1,800 jobs. Chemicals giant DuPont is cutting 2,500 jobs.

All that is overshadowing the fact that new claims for jobless benefits fell unexpectedly last week, although the number of people continuing to claim benefits reached a 26-year high. Initial claims for unemployment insurance dropped to a seasonally adjusted 509,000 last week, from an upwardly revised figure of 530,000 for the previous week. But the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, when the economy was in a steep recession. And Friday morning, of course, we'll get the government's employment report for November. We're expecting job losses there of 325,000 – bringing total losses for the year above 1.5 million.

The Treasury Dept. is mulling a plan to lower mortgage rates to 4.5%. A source tells CNN that lobbyists are pushing Treasury to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to that level. Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said. We'll be examining what it means for homeowners. How much will it help? And will it improve the distressed housing market?

Stocks on Wall Street opened lower this morning as investors reacted to all those job cuts, and have since bounced into positive territory, for now.

Fears of a global economic meltdown prompted two European central banks to slash their key interest rates today in attempts to stem the recession. The Bank of England cut its rate to 2% from 3%, and that followed a reduction of 1.5 percentage points to 3.0% on Nov. 6. The Bank of England has never set its rate below 2%. It was last at 2% in 1951. The European Central Bank, which governs monetary policy in 15 countries, cut its key lending rate by 0.75% to 2.50%.

Wal-Mart reported November sales numbers that trounced expectations this morning as the discounter continues to gain market share from its rivals in a worsening economy. Wal-Mart, the world's largest retailer, said its same-store sales, or sales at its stores open at least a year, rose 3.4%, beating its own forecast for a 1% to 3% increase in the measure for the month. Analysts had expected the retailer to log a 2% sales increase for the month, which also included sales on Black Friday.

Gas prices fell 1.4 cents to $1.789 a gallon. That's the 78th consecutive decrease. According to AAA, the last time the national average price for a gallon of regular unleaded gasoline was near the current price was January 12, 2005, when the national average was $1.789.

Oil prices are hovering around $46 a barrel, a 3-1/2 year low.

And, The Great White Way goes green! This is the latest installment of Mayor Michael Bloomberg's pledge to reduce New York City's carbon footprint 30% by 2030. Ten Broadway theaters have already replaced some 10,000 bulbs with more energy-efficient ones. The rest of Broadway's theaters are vowing to make the switch within 12 months. But not everything is going according to Bloomberg's plan. A federal judge recently blocked his effort to replace every taxicab with a hybrid model by 2012. Now the city will try a different tactic: offering financial incentives aimed at getting more fuel-efficient cars on the road.

See you on Broadway!

Editor's note: Ali Velshi interviews Chrysler CEO Robert Nardelli today. See his full report on the interview and the economy tonight on AC360 at 10pm ET.

Filed under: Andrew Torgan • Bailout Turmoil • Economy • Raw Politics
soundoff (57 Responses)
  1. Herb

    Do all media people have amnesia or are all of you just not informed. There is no substitution for oil and gasoline if American car companies keep making cars that run on petroleum only. What we need are plug-in hybrids that get at least 60 miles to the charge. And I am talking Suburban’s here. The technology exists. Just like all electric cars which also may be part of the solution. In 1997 the state of California mandated that electric cars be sold in the state. General Motors produced a wonderful car, the EV1. But they would not sell to the public. They would only lease it. Then the auto companies sued the state so they could stop building them. Because they felt that they were against their long term interest. The thing that makes plug in hybrids the key is that we can plug our cars in at night and still have the confidence that if we need to take a trip we can still fill her up. But the country’s need for petroleum will be drastically reduced.
    And that leads us on to alternative fuels. If we are building plug-in hybrids and the average person is now only filling up once a month or less. Then alternative fuels then make sense because we need much less fuel and the cost will be low because of lack of demand. And drill baby drill can be turned into grow baby grow.
    The big car companies are asking for a bailout right now. We should give it to them, but only if they agree to start making these automobiles their new fleet. And again tax breaks and low interest loans for the consumers, along with the car companies agreeing to produce affordable models for the average person to be able to enter the market.

    December 5, 2008 at 7:48 am |
  2. Raechel Daniels

    Congress & America was sold on the $700B bailout because "industry" needed those funds for operating purposes on a day to day basis.

    Shouldn't the Big 3 Automakers be tapping in on THAT money - or is there "double dipping" going on here?

    December 5, 2008 at 7:03 am |
  3. Pearl Pfiester

    GM made an electric car, EV1, in 1996 because of a mandate in CA for greener emissions. Claiming there's "no demand", GM TRASHED the brand new cars and technology despite Americans begging to buy their leased EV1 car.

    Watch: "Who Killed the Electric Car?"

    These companies made their bed so they can lay in it. "What comes around, goes around". Let's invest in companies who utilize technology instead of hiding it.

    December 5, 2008 at 5:03 am |
  4. Dr. Marcus

    Detroit has driven America to the brink of disaster. Most of our current problems can be traced to what Detroit has, and hasn't done.

    Firstly, back in the 1970's Detroit should have taken the lead in developing new technologies which would have freed America's hostage-like dependence on oil. They should have set about going into R & D on electric cars and superior batteries. This would have created a lot of spin-off businesses and technologies just as the APOLLO program did, as well as brand new manufacturing sectors. Wind power, photo electric batteries, solar, thermo– would all be better off today if Detroit had done any strategic planning back in the 1970's and 1980's. Instead, they continued to invest and put their energies into old, failed, business models and production for their own selfish short-term profit.

    Secondly, had Detroit done what was suggested above, it would have created more new industries, products, jobs and research work for Americans at home, thus creating real wealth.

    Thirdly, Detroit's gas guzzling cars require oil. Lots of it. Our US dollars left America to buy that oil, and in the process built up Middle Eastern Countries which are now hostile to us. Because of the scramble for oil, money, power, and influence in the middle East, unstable and dangerous situations have developed. If America did not need their oil, how would Khomeini, Ghaddafi, Saddam, and Osama bin Laden have arisen? These oil rich countries fund terrorism and have an anti-American/Western agenda, do they not? Now, we suffer terrorism in our own country. Gee thanks Detroit!

    Fourthly, Detroit's history of recklessly selfish and short-term actions have put the American dollar and economy in peril as discussed above.

    The American people should NOT be expected to reward those who have caused our country so much harm and are making us miserable.

    I hope that more people can "connect the dots" and see what an awful position Detroit has put us in.


    December 5, 2008 at 4:06 am |
  5. Vj Piarulli

    The bailout to banks is planned to cost us about 750 Billion Dollars.
    Multiply about 75 million American families x $10,000....that's the same amount. What if the Treasury placed a 750 Billion Dollar purchase order with the American automakers to produce and deliver 75 million 50 MPG (Prius like hybrid or electric) high quality vehicles at a price of $10,000 each. The Commerce Department would then proceed to offer these these vehicles "free" to any tax paying family household purchasing any new American car at any price. Which of these plans....the bank bailout or the super car giveaway would be best for the economy. They both cost the same. But it is completely obvious that only the car deal would be certain to jump start the economy, create new jobs, and cut National fuel consumption by 30 or 40%.

    December 5, 2008 at 3:42 am |
  6. J.V.Hodgson

    In any business the timing of decisions and actions is a key criteria of success.
    The endless to and fro congress and Bush ( Pelosi/Bush) wastes time we do not have.
    The $25bn was for Eco cars and research. Why will it take Chrysler GM and Ford till 2011 or 2013 to get these on the road if they use the $25 billion allocated for that? Nonsense, use it for what was intended.
    The current language of emotives like "bailout" "slashing labour costs" ( probably means labour redundancy as opposed to cutting labour cost to competitive levels which is the real need) "bankruptcy" should be replaced with "Loans or repayable bond holdings or shares" ,"Competitive labour agreements both for now and in future" and Bankruptcy by "corporate re-structuring" or a "planned and managed bankruptcy" government backed and supported.
    Trying to or linking eco car development and corporate re-structuring is not a commercially viable solution they are separate but necessary components of the longer term competitiveness of an essential industry to the US economy.
    The political ideological debate is taking time not available and will only increase th cost ultimately. The debate about where the money should come from is a fascile debate as long as anything given is a lending or investment in bonds or Shares, both of which will be more secure if the needed re-construction, amalgamation, or restoration of competititive abilty is a success.
    Medis play your role, demand a plan from Republicans and Democrats, and the Obama transition teams alike and demand they stop the gridlock in the interest of the good ole USA and its people.

    December 5, 2008 at 2:00 am |
  7. Jerry Culberson

    The Big U.S. Oil Companies made over 100 BILLION DOLLARS this year alone, and even more in 2007; why have not offered to make loans to the Big 3 Auto Companies.

    Since they feed off one another, why not help one another ?

    A 35 Billion Dollar Loan would be only about 3 months earnings for BIG OIL.

    December 5, 2008 at 1:49 am |
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