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December 2nd, 2008

Big Three Submitting New Plans to Congress Today



Today is the day CEOs from the Big Three will hand over their plans to Congress that are expected to layout their “path to viability.” Top execs from GM, Ford, and Chrysler were sent back to Detroit with their tails between their legs, after U.S. lawmakers rejected their pleas for government funding. After today’s submission of their “battle plans,” the CEOs are slated to meet with Congress in two separate sessions Thursday and Friday. Some expect a Congressional vote as early as next week.

The promises each automaker has proposed has yet to be seen, but CNBC’s Phil LeBeau, author of the blog Behind the Wheel, bets the reactions will be mixed:

Will GM sell some of its brands? Will Ford be able to turn a profit with small cars? What is Chrysler’s cash on hand?

The answers to these questions will go a long ways toward determining whether the public buys into the idea of lending the Big 3 billions of dollars.

The question that resounds in our heads is simple: Will automakers simply regurgitate what Congress wants to hear, or have they truly ironed out significant and revolutionary changes that will make an impact on the market? You can bet each of the Big Three will include stipulations surrounding greener, more fuel-efficient cars, trimmed executive pay, and consolidation of brands and operations.

Bill Vlasic of the New York Times suggested in a piece published yesterday that Detroit’s automakers should strongly consider trimming their number of brands and models, and focus mightily on designing a more refined number of smaller, more fuel-efficient vehicles:

Between them, General Motors, Ford Motor and Chrysler sell 112 different car and truck models through 15 brands in the United States.

By contrast, the top three Japanese automakers — Toyota, Honda and Nissan — have roughly half as many choices with 58 models combined sold through seven brands.

Supporting all those models and brands with separate marketing budgets, design teams, dealers and management divisions represents an enormous expense, particularly for G.M.

The proliferation of models is one big reason the American companies are losing so much money as vehicle sales slump to their lowest point in 15 years.

For their last meeting with Congress, the CEOs arrived in Washington in private jets; Ford’s Alan Mulally was reported to have made the 10-hour trek via automobile — smart move. As we quoted above, Lebeau ends his post pondering whether the Big Three’s new plan will be enough for the public to buy into lending the automakers $25 billion — as every taxpayer knows from every other bailout, public opinion has little to do with it.

READERS: Is less than two weeks enough time for automakers to convince Congress their plan has what it takes to get the $25 billion?

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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