President Bush's top economic adviser reacted coolly yesterday to the idea of providing substantial federal assistance to beleaguered U.S. automakers, saying their problems have more to do with their vehicle lineups than with anything the government could fix.
"They don't need a bailout," said Allan B. Hubbard, in response to a reporter's question during the president's trip to North Carolina. "All they need is the time to restructure, and we're confident they'll be very successful."
Automakers have been asking for federal help on several fronts, including health costs, pension liabilities and currency policy. They are also seeking subsidies for developing fuel-efficient "hybrid" vehicles. At the same time, they have studiously avoiding using the word "bailout" because they believe the appetite in Washington for a major government intervention has waned since the federal rescue of Chrysler Corp. in the late 1970s.
Hubbard, director of the White House National Economic Council, attributed the problems of General Motors Corp. to the declining consumer appeal of its vehicles that get poor gas mileage during a time of high fuel prices. Large sport-utility vehicles and other trucks have been a big source of profit for GM and Ford Motor Co.
"Obviously, GM has some big challenges right now, primarily because they make automobiles that are less fuel-efficient," he said. "And with higher energy prices, the American people are interested in more fuel-efficient cars."
General Motors and Ford are struggling to pull out of one of the most difficult downturns in the industry in decades. Despite Detroit's economic slide, Hubbard said, the overall U.S. economy is strong.
"It's unfortunate that General Motors is going to have to be laying off at the same time Toyota and other companies are expanding in the U.S.," Hubbard said.
Executives at GM and Ford have said federal help is key to their revitalization and their ability to keep jobs in the United States. In a Washington speech last month, William C. Ford Jr., chairman of Ford, said automakers in other countries were advancing with the help of government assistance, in particular support for new technology. He said the U.S. industry was in danger of falling behind without significant government intervention.
Last month, GM announced a restructuring plan that includes closing several factories and cutting 30,000 workers. Ford is set to outline its own turnaround plan next month. William Ford has said the plan will include "significant plant closings" and "top-to-bottom" job cuts.
Reports of which factories might be marked for closure are already rattling public officials in several states. Lawmakers in Congress, too, have grown increasingly worried as the industry's job losses mount and the cuts spread to communities outside of Michigan and other Midwest states.