LANSING – The crisis facing the Big Three automakers is so dire that federal aid is essential by next week, Governor Jennifer Granholm said on Thursday, as the companies and the UAW presented their arguments to Congress on $34 billion in bridge loans. She said she accepts as true the assessment of General Motors Corporation of its urgent need for financing before the end of the year to ensure its survival.
Stepping up her portrayal of what’s at stake to ensure the survival of the automakers, Granholm said the failure of one or more of the companies would turn a national recession into a depression. She said the widespread impact throughout the American economy, affecting businesses from truckers to Microsoft, is something that the public apparently does not understand given its opposition to the requested loans.
“The cost to the taxpayers would be far worse because of the social cost they would have to pick up if we didn’t spend a little bit on an ounce of prevention,” the governor said.
Asked if she believes GM will fail without the loans it is seeking, Granholm told reporters, “What they’ve been saying is, if they don’t get the loan by the end of the year, it’s game over.” She said the state is undertaking contingency plans to deal with the potential of the failure of a portion of the industry.
The governor noted talk in Congress of creating a new oversight board threatens to delay the aid package, stressing her view that next week is a critically important deadline for action by Congress or President George W. Bush. The Bush administration has resisted calls to tap into the existing financial rescue package to provide aid to the automakers.
“Time is of the essence. Congress has to act next week or the president has to act next week,” Granholm said. “If this is really an emergency, and I believe it is, then I would implore the president to step forward.”
UAW President Ron Gettelfinger also raised the specter of GM’s failure unless aid is provided soon in his testimony on Thursday.
The company in its proposals to Congress said it needed at least $4 billion in loans before the end of the year.
A CNN poll showing 61 percent of respondents opposing the loan program demonstrates that the industry and others who back it “have not done a good enough job in letting the citizens know how important this industry is to the country,” the governor said. Because of the consequences across the country, she said, “We should be paying a good amount for a pound of cure.”
But the governor also said despite the public’s view, there is recognition within Congress that something has to be done because the ramifications are so serious. She said one in 10 jobs in the United States are tied to the auto industry. “The ripple effects across the country are so serious that the country needs to be aware of it,” Granholm said.
Comerica chief economist Dana Johnson said in an updated report Thursday that the impact on Michigan alone would be the loss of 225,000 jobs or 5 percent of all payroll jobs, if two of the automakers filed for bankruptcy, an option that some in Congress still favor. Even with the loans, he expects another loss of 90,000 jobs across the state in 2009.
As for a proposal posed Wednesday by Sen. Hansen Clarke (D-Detroit) for the state pension funds to provide additional support by buying GM’s headquarters and leasing it back to the company, Ms. Granholm called it “bold” but something without details and which she does not expect would be needed if the federal aid is provided.
Granholm said the state has received 31 notices of large-scale layoffs since November 1, most of them auto-related such as those earlier this week in the steel industry. In all, she said 8,000 workers were affected.
Two more important businesses announced layoffs on Thursday: 600 by Steelcase furniture and 350 by Cliffs Natural Resources at its Upper Peninsula iron ore mining operations.
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