November 19, 2008 Bill to rescue automakers is stalled Play video

(NECN: Peter Howe) - In Washington, it is looking less likely that the auto industry will get its wish for financial help from the current Congress, and the auto executives may have their own actions to blame. For a second day, leaders for the Big Three testified before Congress.

The Big Three CEOs are urging Massachusetts Congressman Barney Frank's financial services committee to approve what they are calling a $25 billion bridge loan. But, more and more people are asking why? And, why not have them reorganize in bankruptcy? Among them, remarkably, is Mitt Romney, former Massachusetts governor and son of an American Motors CEO.

In a New York Times op-ed, Romney writes that Detroit needs a turnaround, not a check. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs to shed excess labor, pension and real estate costs.

Others suggest federal aid be conditioned on a pre-negotiated or pre-packaged bankruptcy filing, and ask, if car companies couldn't successfully emerge from Chapter 11 reorganization, why should taxpayers prop them up?

NECN talked to Dave McCurdy, CEO of the Alliance of Automobile Manufacturers, by satellite from a car expo in Los Angeles. NECN asked what would be so bad about a Chapeter 11 bankruptcy by any or all of the three carmakers.

"Unlike the airline industry where they seem to use bankruptcy as part of their business model, our industry is very interconnected. One supplier

Carmakers say one in ten U.S. jobs depends on the industry. They also warn shoppers would desert bankrupt carmakers, worrying about warranties and replacement parts.

"Bankruptcy is not something that's considered lightly. I think it has an effect on brand and the ability to sell,'' McCurdy said.

Frank is shocked by the blasé talk of a major blue-collar U.S. industry going bankrupt: "When people talk about bankruptcy, I am struck that bankruptcy has become to some extent the new spectator sport. People are perfectly prepared to watch other people go through it, without understanding the stresses and strains it imposes."

Like G.M. worker Norma Steel, who spoke to ABC news: "I want to retire. I've been here 26 years, and I'm looking for four more years, and I don't want to see the plant go down."