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US car firms 'should go bankrupt' | US car firms 'should go bankrupt' |
(about 1 hour later) | |
The United States's biggest carmakers should be allowed to go bankrupt, a leading US politician has suggested. | The United States's biggest carmakers should be allowed to go bankrupt, a leading US politician has suggested. |
Republican senator Richard Shelby said that Ford, GM and Chrysler should not get a $25bn government bail-out. | Republican senator Richard Shelby said that Ford, GM and Chrysler should not get a $25bn government bail-out. |
Mr Shelby said this would avoid factory closures and job cuts, and would just be "life support". | Mr Shelby said this would avoid factory closures and job cuts, and would just be "life support". |
He called for the car firms' bosses to quit and for the companies to file for bankruptcy protection, so they could carry out much-needed reforms. | He called for the car firms' bosses to quit and for the companies to file for bankruptcy protection, so they could carry out much-needed reforms. |
Job losses | Job losses |
Mr Shelby made his remarks a day after chief executives from Ford, GM and Chrysler, appeared before the Senate's banking committee. | Mr Shelby made his remarks a day after chief executives from Ford, GM and Chrysler, appeared before the Senate's banking committee. |
Mr Shelby has opposed proposals to use government money to bail-out the "Big Three" carmakers because he does not believe such a move would be effective. | Mr Shelby has opposed proposals to use government money to bail-out the "Big Three" carmakers because he does not believe such a move would be effective. |
"I don't think they have immediate plans to change their model, which is a model of failure. I believe their best option would be some type of Chapter 11 bankruptcy," he said. | "I don't think they have immediate plans to change their model, which is a model of failure. I believe their best option would be some type of Chapter 11 bankruptcy," he said. |
He also called for senior management changes, saying "these leaders have been failures and they need to go". | He also called for senior management changes, saying "these leaders have been failures and they need to go". |
CHAPTER 11 BANKRUPTCY Part of the US Bankruptcy Code giving troubled firms time to reorganise themselvesUnder Chapter 11 protection a bankrupt firm can carry on trading under existing managementIt prevents creditors from forcing a firm into liquidation in order to sell-off its assets class="" href="/1/hi/magazine/7642138.stm">Layman's credit crisis glossary | |
The carmakers' top executives and auto workers union president Ron Gettelfinger have returned to Congress on Wednesday, appearing before a House committee to plead for help again. | The carmakers' top executives and auto workers union president Ron Gettelfinger have returned to Congress on Wednesday, appearing before a House committee to plead for help again. |
General Motors chief executive, Rick Wagoner, has warned that if the US car industry failed, it could lead to a loss of three million jobs within the first year and ripple throughout communities around the country. | General Motors chief executive, Rick Wagoner, has warned that if the US car industry failed, it could lead to a loss of three million jobs within the first year and ripple throughout communities around the country. |
"This is all about a lot more than just Detroit. It's about saving the US economy from a catastrophic collapse," he said. | "This is all about a lot more than just Detroit. It's about saving the US economy from a catastrophic collapse," he said. |
Political opposition | Political opposition |
However, the $25bn rescue plan is opposed by the Bush administration and Republicans in Congress who are reluctant to take the money from the Treasury's $700bn bank bail-out scheme. | However, the $25bn rescue plan is opposed by the Bush administration and Republicans in Congress who are reluctant to take the money from the Treasury's $700bn bank bail-out scheme. |
Republicans and Democrats from states with big interests in the car industry have worked to develop a political compromise that could quickly aid the industry before the end of the year, but wider support is sparse.The US car industry is in need of resuscitation | Republicans and Democrats from states with big interests in the car industry have worked to develop a political compromise that could quickly aid the industry before the end of the year, but wider support is sparse.The US car industry is in need of resuscitation |
Critics have argued that many of the industry's problems have been self-made, citing their past reliance upon gas-guzzling trucks and SUVs and their opposition to tougher fuel-efficiency regulations. | Critics have argued that many of the industry's problems have been self-made, citing their past reliance upon gas-guzzling trucks and SUVs and their opposition to tougher fuel-efficiency regulations. |
Chrysler's chief executive, Bob Nardelli, rejected suggestions that the carmakers should seek Chapter 11 bankruptcy protection. | Chrysler's chief executive, Bob Nardelli, rejected suggestions that the carmakers should seek Chapter 11 bankruptcy protection. |
"We just cannot be confident that we will be able to successfully emerge from bankruptcy," he said. | "We just cannot be confident that we will be able to successfully emerge from bankruptcy," he said. |
Financial troubles | Financial troubles |
GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who has promised to help the industry - is sworn in in January. | GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who has promised to help the industry - is sworn in in January. |
On Tuesday, Treasury Secretary Henry Paulson also resisted diverting funds to the US car industry. | On Tuesday, Treasury Secretary Henry Paulson also resisted diverting funds to the US car industry. |
Democrats have so far rejected the option favoured by the White House and Republicans, which is to let the industry use a $25bn loan programme designed to help the companies develop more fuel-efficient vehicles. | Democrats have so far rejected the option favoured by the White House and Republicans, which is to let the industry use a $25bn loan programme designed to help the companies develop more fuel-efficient vehicles. |
The car industry's problems are not limited to the US. Toyota has said it will shut down all of its North American factories for two days next month. | The car industry's problems are not limited to the US. Toyota has said it will shut down all of its North American factories for two days next month. |
European car companies have asked for 40bn euros (£33.5bn; $50.6bn) of soft loans for the industry. | European car companies have asked for 40bn euros (£33.5bn; $50.6bn) of soft loans for the industry. |
Do you work for Ford, GM or Chrysler? What do you think of this news? Send us your thoughts and comments using the form below: | Do you work for Ford, GM or Chrysler? What do you think of this news? Send us your thoughts and comments using the form below: |
In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below. | In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below. |
Name | Name |