Big Three Lost in Fast Lane

A sum of $34 billion. That's the new magic number the General Motors, Ford, and Chrysler CEOs have calculated they'll need from Uncle Sam as part of a "turnaround plan" to continue operating, the Wall Street Journal, New York Times, and Detroit Free Press write, leading off their business coverage today. This time on Capitol Hill, the CEOs struck a more humbled posture. "All three companies' chief executives agreed to symbolic steps, including salaries of $1 a year and the elimination of corporate jets to make their case more palatable, and they were traveling to the capital in hybrid vehicles to underscore the point. It's 520 miles from Detroit to Washington," the Detroit Free Press writes. To add some urgency to their arguments, GM and Chrysler admitted that if they don't secure federal bailout funds they could collapse before the end of the month, the newspaper adds ominously.

Their plea was underscored by yet more grim industry news delivered on Tuesday: November was "the worst sales month in 26 years" for automakers, the NYT reports. Sales at GM fell 41 percent while Chrysler saw a 47 percent dip, and Ford saw a 30 percent dip last month. The worsening climate has forced GM to disclose a bare-bones restructuring that "would deeply cut jobs, factories, brands and executive pay as part of its plea to get $12 billion in federal loans and an additional $6 billion line of credit." Ford, the best positioned of the three, said in return for federal aid it would roll out a "family" of hybrid and electric vehicles by 2012, according to BusinessWeek.

While lawmakers won't decide until the end of the week on whether to extend aid to Detroit, it appears the Big Three have won over one crucial vote: House Speaker Nancy Pelosi, who declared yesterday, "I think it’s pretty clear that bankruptcy is not an option." Still, underscoring just how contentious a taxpayer-funded bailout is, the NYT went to Michigan to find—surprise, surprise—that there is opposition there, too, to a federal lifeline for the Big Three.

While Congress remains very much divided over Detroit, cue Treasury Secretary Henry Paulson, who has to enter more hostile environs if he wants to pry away the second tranche of the promised $700 billion in bailout funds. According to the WSJ, Paulson "is debating whether to ask Congress for the second installment of the $700 billion bailout package, concerned about competing demands for the funds and a potentially hostile reaction from lawmakers." Paulson may go to Congress as soon as next week if the economy continues to deteriorate, the newspaper writes. Paulson's latest maneuvers come after the nonpartisan Government Accounting Office on Tuesday released a report that is critical of the Bush administration's oversight of how the bailout money is being distributed. The GAO report, according to the Washington Post, says the Bush administration "has failed to adequately oversee its $700 billion bailout program and must move rapidly to guarantee that banks are complying with the plan's limits on conflicts of interest and lavish executive compensation."

Retail sales for November show a "stunning decline" for consumer goods across the board, writes the NYT. Even "a bump in sales on Black Friday" wasn't enough to stop the rot, notes the WSJ. "Sales fell 20% from year-ago levels at apparel and department stores combined, 24% at luxury stores and 25% at electronics stores." A big part of the problem is that while many shops are busy, they are not converting that foot traffic into sales. "Everyone that normally goes shopping will go shopping. But the question is: How much are they going to spend?" one analyst tells the WSJ.

"Delta Will Clip Its Wings To Stay In Air" is how Forbes headlines the airline's drastic decision to institute an 8 percent to 10 percent reduction in U.S. domestic flights and a 3 percent to 5 percent reduction of international routes for 2009. Delta's woes delivered an immediate blow to Boeing, whose shares fell after the WSJ reported that Delta wants to trim Northwest's order for Boeing's new 787 Dreamliner jets and increase the number of larger 777 jets it is buying. Things must be bad if the Brits and Aussies are willing to work together. "Australia’s Labor government said it is open to a $5.9 billion merger between Qantas and British Airways as long as it was not a takeover and that 51 per cent of the airline was in the hands of Australian investors." Any merger would be "the boldest move yet considered to accelerate the consolidation of the global airline industry," writes the FT.

Finally, the WSJ reports this morning that Goldman Sachs is mulling a new secret weapon that seems ripped from the pages of the business section a decade ago to turn around its struggling operation: the launch of an online bank. The move would give it broader access to funds, the newspaper writes, made possible by its recent decision to transform itself into a bank holding company. Goldman Sachs operating a dot-com commercial bank? Yes, the idea is a head-scratcher. "This move is pretty much the polar opposite of what you think about when you think about Goldman Sachs," Glenn Schorr, an analyst at UBS AG, told the newspaper. "But one of the keys to their future is being able to fund their balance sheet, and if they and others can't do it in traditional ways, it makes complete sense to explore other avenues."