Auto Makers Want $25 Billion No-Strings Attached Loans To Avoid Up To A Million Layoffs

It has been that way as long as anyone can remember - the North American economy tied irrevocably to the auto sector. There used to be an old expression 'What's good for General Motors is good for the USA.'

Not anymore.

With auto sales down to their worst levels in a quarter of a century, even the biggest of the big are wondering how long they can weather the financial storm.

Consider the numbers. GM has seen sales slump 45 per cent over last year. Chrysler is down 35 per cent. Ford watched its sales charts dive by 30 per cent. And not even the Japanese giants, which had been outstripping the North American firms, are safe. Toyota has lost 23 per cent of it buyers since 2007.

Hard times have led people to hang on to their cars much longer. And even drastic discounts and incentives haven't tempted them back to the showrooms.

All of which has led to the once unthinkable sight of the Big 3 coming to the U.S. government with hat in hand and an equally large demand: give us $25 billion in loans with no strings attached, or watch the key engine of the economy stall, possibly for good.

The feds down south have already promised $25 billion in technology loans, but they've been held up by red tape. And now the major manufacturers want even more.

The Big 3 are counting on president-elect Barack Obama to come through with the cash to save them, after he gave indications he was sympathetic to their plight during his campaign.

And if he doesn't?

The results are already starting to become apparent.

GM and Chrysler are both talking merger. And talk about Hobson's choice. It's estimated a joining between the two could cost 24,000-35,000 jobs, close half of the latter company's 14 manufacturing plants and shed another 50,000 jobs amongst suppliers. 

And that's the best case scenario, because if Chrysler goes out of business, up to a million positions could disappear.

"It's not just the three auto companies, it's suppliers, all the way down the chain," worries John Engler of the National Association of Manufacturers.

Ontario has already been hit hard by the problem. Our new status as a 'have-not' province has been revved up, primarily by the hit to the auto sector. And things aren't looking good.

The Center for Automotive Research is predicting about 2.5 million jobs across the economy would vanish in the first year if the U.S. auto industry shrinks by 50 per cent.

So for now, they're pinning their hopes on that big loan and on the next president of the U.S. to keep the brakes from slamming on a suddenly impoverished industry.

But Obama won't be in power until 2009. And there are a lot of roadblocks on the way before then. "He's not here until January (20th) and that's a long time in the life of these companies at the moment," Engler concludes.

And if you believe those in the boardrooms, that life is hanging in the balance.