Lawmakers push for auto industry bailout

Yahoo Finance's Rick Newman joins Jen Rogers and Andy Serwer to discuss the possibility of a bailout for the auto industry amid the coronavirus pandemic.

Video Transcript

JEN ROGERS: Rick Newman, the auto industry had to get a lot of help during the financial crisis, and it looks like we might have Congress stepping in here as well this time around. How's this going to play out?

RICK NEWMAN: Yeah, a new narrative in Congress. Maybe we need to do something to help the auto industries.

Now this is definitely not General Motors and Chrysler and Ford themselves coming out and saying could you give us yet another bailout? after the one that GM and Chrysler got in 2009 and 2008. But you've got Midwestern legislators saying this industry is getting clobbered. And, you know, the automotive industry goes way beyond the big-name automakers. I mean, the supply chain is huge, and it employs around 10 million Americans, many of them clustered in the Midwest and in Michigan. So there's now talk about doing something to help the auto industry in the next stimulus bill or the one after that.

And I don't think there's any chance it would be direct aid to automakers, but oldsters may remember the Cash for Clunkers program in-- I think it was 2009. Those were incentives financed by the US government to trade in older vehicles for new vehicles. So that was a way of stimulating demand. So I don't know if that would be exactly the idea, and I don't know if it would pass either, but we're going to start hearing more about a way to help the auto industry in one of these stimulus bills.

JEN ROGERS: So, Rick, you don't see a way where the government's going to come in and actually take equity, any kind of really close relationship like that? You think it's on the outside that they're going to be playing?

RICK NEWMAN: Right, no chance of that. First of all, the Big Three automakers-- and it's now kind of like 2 and 1/2. It's Ford and General Motors and also Fiat Chrysler. They're in much better shape than they were in 2008 and 2009. I don't think anybody thinks there's a real risk of bankruptcy this time around. I mean, they've gotten rid of all kinds of excess capacity. GM and Chrysler, because of bankruptcy, were able to get their debt load down. GM today, for example, says they have enough cash to keep going until the fourth quarter under, you know, pretty bad scenarios, even with a big downturn in sales.

But the second-tier and third-tier suppliers are not necessarily in such good shape. And those, again-- those are some-- they employ a lot of people. You know, they make brake calipers and all the components and parts-- engine parts and stuff like that that go into these vehicles. And that's a lot of jobs, and those are politically important states. Michigan especially a big swing state that is going to help determine who the next president is. So some pretty good chance we might see something here.

ANDY SERWER: Can you imagine you guys, though, if there was some sort of bailout and how loudly Elon Musk would howl? And actually he would have a point because if you think about it, internal-combustion engines and continuing to build them ad nauseum is a moral hazard, right? You could make that argument.

And by the way, never mind their capital structures and their efficiencies et cetera, et cetera. So I don't think that's going to happen. But I would love to see Elon if that did.

RICK NEWMAN: Well, you know, Andy, in the Cash for Clunkers program in '09, there was an environmental rationale for that. And remember, it was Obama, the Democrat, and Democrats controlled both houses of Congress. So we knew they were pushing for higher MPG levels. But also by taking older vehicles off the road, you're taking less efficient cars that get worse mileage and pollute more off the road and putting more efficient cars on the road.

But that doesn't apply this time around because it's the Trump administration. He doesn't care about that. This is not a priority among Republicans who control the Senate. So you're going to have to find some other rationale for this.

JEN ROGERS: I'm sure the big four will probably point out, although you can get the EV credits for them, how much Tesla's been helped by some tax incentives--

ANDY SERWER: True that.

JEN ROGERS: --along the way as well.