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US Automakers Struggle as Restructuring Deadline Looms


Detroit automakers are finalizing their survival plans for the U.S. Treasury as the Obama administration readies its plan to oversee the depressed auto industry.

The Obama administration has decided to set up a panel to oversee the industry's restructuring. It will be led by U.S. Treasury Secretary Timothy Geithner and the head of President Obama's economic council, Lawrence Summers.

David Axelrod, a top advisor to the president, says all stakeholders must take part in the auto industry's restructuring.

"There are millions of livelihoods that depend on it - not just at the auto companies, but at the spin-off manufacturers and auto dealers and so on," said David Axelrod. "So we have a real interest in seeing the auto industry survive. And it is going to require a major restructuring."

The industry, which has lost billions of dollars during the past three years, borrowed more than $17 billion from the government in December. As a condition for the loan, General Motors and Chrysler must submit detailed plans on Tuesday for regaining competitiveness against European and Asian rivals.

Jack Fitzgerald, who runs several car dealerships near Washington, says it is clear what the industry must do.

"What they have to do to be competitive is: managers have to be paid what the competition pays it managers and labor has to be paid what the competition pays its labor," said Jack Fitzgerald.

The cost structure of US-based car companies is higher than for European or Japanese firms.

Fitzgerald is critical of the leadership of the U.S. carmakers. He wonders why the Detroit firms need more taxpayer money when dealers have already paid them for the tens of thousands of cars that are in showrooms waiting to be sold.

"It truly is becoming like a Ponzi scheme [a fraudulent pyramid operation]," he said. "Look at Chrysler. Chrysler has 400,000 unsold cars in the field [at dealerships] and they've been paid in full for all of them. Where's the money? The suppliers are not getting paid and the factories have been paid in full for their production."

Fitzgerald says if any of the Detroit "Big Three" automakers - General Motors, Ford and Chrysler - goes bankrupt, the ripple effects across the country will be huge - not only factory workers, but also dealers and the banks who lend to them would be directly affected.

Economists estimate that the bankruptcy of even one U.S. automaker would cost least one million jobs. The American car market is in its worst sales slump in decades. But not all of the news is bad. Some dealers report that sales in January and thus far this month are above December's depressed level.


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