Bailout offers brief reprieve for automakers

At a news conference to announce the final touches to his Cabinet, Obama would not say if he'll make any changes to the auto loan package.

But Obama warned automakers that "the American people's patience is running out." He said the automakers should "seize on this opportunity" to come up with a plan to make their companies sustainable.

Obama also said a final restructuring package shouldn't just include concessions from the workers. He says they shouldn't be the ones "taking all the hits." Obama says everyone involved with the auto industry has to be "part of the process."

Obama said his economic team will talk with management and workers to find out how the industry and its jobs can be preserved not just in the short term, but in the years to come.

The Bush plan requires the automakers to show a positive net present value by March 31, which essentially means they are on their way back to profitability. But the deepening recession means automakers are likely to sell only 10 million to 10.3 million vehicles next year, according to a Global Insight projection, compared with 14 million to 15 million just a few years ago.

“No automaker can survive as a viable business in the United States if fewer than 11 million vehicles are sold annually industrywide,” said Jesse Toprak, senior analyst at automotive Web site Edmunds.com.

The economy is unlikely to give much help, with a turnaround unlikely before mid-2009, said Lave of the Tepper School.

“Others say it won’t end until 2010, so it’s about six to seven months before car sales sill pick up much, or it could take 12 to 13 months,” he said. “So if you see how much cash GM is burning through each month — about $4 billion at the last count — it’s not a pretty picture, and that money will just be needed to keep them in business, and none of it will be going to finance the corporate redesign they need to do.”

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