Automakers' $25 Billion Fast-Track Bailout

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Without an acquisition by GM, Chrysler also will need as much help as possible. "Chrysler as we know it will cease to exist very soon," said Kimberly Rodriguez, principal of Grant Thornton's automotive consulting practice. Chrysler's Nardelli said he would not confirm discussions with GM. Said Nardelli: "Returning Chrysler to profitability continues to be the key focus of the management team.…We are significantly challenged by today's economic environment and by the automotive industry's unprecedented downturn. As an independent company, we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid in our return to profitability."

Light at the End of the Decade

Auto-industry proponents say the U.S. only needs to help keep the Big Three afloat until the middle of 2010, when the benefits of their cost-cutting agreements with the United Auto Workers kick in. Also, auto sales should have recovered somewhat by then. CAR's Cole says he believes the industry will be in a good position after 2010 to start repaying loans.

"The three Detroit companies have been aggressively restructuring to remove excess manufacturing capacity and health-care costs that have long held its profits down.…When the economy turns upward, these companies are well-positioned like never before to make huge amounts of profit."

Many are not convinced, of course (BusinessWeek.com, 10/29/08). There is far less support for a Big Three bailout on the two coasts, which are less reliant on auto jobs and less likely to buy American auto brands.

The Competitive Enterprise Institute (CEI) condemned the bailout proposals as a huge mistake that would hurt taxpayers and, ultimately, the auto industry itself.

"Congressional attempts to favor domestic automakers will be a waste of taxpayer money, a skewing of automaker competition, and an invitation for even more industries to seek bailouts in the future," said Sam Kazman, CEI general counsel. "If Congress wants to help the auto industry, the best way to do so is by repealing the stringent fuel economy standards that it enacted last December," Kazman added. "With gas prices dropping, fuel economy mandates will become an even tighter noose around the industry's throat. Meanwhile, thousands of vehicle occupants will be killed due to reduced crashworthiness as the industry downsizes automobiles to meet the standards."

Larry Sinclair, an accountant living in Pasadena, Calif., and a Honda owner, says he has written to his representatives in Washington opposing taxpayer help for the auto companies. "They have been asleep for 30 years and have made their own problems, so why should I help bail them out?" says the 47-year-old father of two. "Let the market decide which companies live and die."

Representative Henry Waxman (D-Calif.) has been a vocal and frequent critic of Detroit's opposition to higher fuel-economy regulations. Waxman said this week he will challenge Representative John Dingell (D-Mich.) for the chairmanship of the House Energy & Commerce Committee.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.