Facing stubborn resistance from some Senate Republicans to a bailout for the ailing auto industry, the three major carmakers, General Motors, Ford, and Chrysler, have reportedly decided to sweeten the deal by offering every American household a free car if the bailout goes through.
A version of the emergency rescue package passed the House on Wednesday night but is expected to encounter serious opposition in the Senate.
The plan to give away the free cars, which is intended to ratchet up support from the public for Federal assistance for the auto companies, was first reported on the website of the Financial Times on Wednesday morning and has since been confirmed by senior executives. The plan, dubbed the "Unprecedented Winter Sales Event" in internal company documents, was reportedly the brainchild of a marketing team at Chrysler, the most beleaguered of the Big Three.
Details of the giveaway are sketchy but it seemed likely that, initially, the free cars would come from unsold inventory and from brands which are likely to be phased out in a restructuring. But, because there are currently approximately 120 million American households and less than 6 million cars sitting in dealers' lots, eventually new cars would have to be manufactured to close the gap. Detroit currently produces about 8 million cars annually. The automakers are expected to argue that the size of the bailout package, currently about $14 billion in short term financing, needs to be increased exponentially in order to assist the companies in making good on their pledge.
In a draft document that was widely circulated after the Financial Times story broke, David McCabe, president of marketing at Chrysler, wrote that "giving every American family a free car is a great way to build good will for our companies, to promote our brands, and to reintroduce many Americans to domestic automobiles. Not only that, in order to meet the demand for the free cars, we will have to open new plants, restart idled assembly lines, and hire approximately 230,000 new unionized workers."
A spokesman for the United Auto Workers said that the proposal had the union's "unqualified support."
Rick Wagoner, the embattled head of GM, whose ouster has been called for by Sen. Chris Dodd (D-CT), the Chairman of the Senate Banking Committee, responded to a request for comment with an email message saying that "Detroit understands incentives. If there's one thing we've learned in 90 years of selling cars, it's how to seal the deal."
Opponents of the bailout were incensed by the move. Sen. Richard Shelby (R-AL) told reporters gathered outside his office, "This will be the biggest single disposal of lemons since Paul Bunyan set up his lemonade stand." He repeated the line four more times to insure that it was heard by everyone present and then passed through the group asking if everyone had "gotten the Bunyan line down" and if they wanted him to repeat it a sixth time.
Experts were divided on the possibility of success for the plan.
Shirley Rubin, an economist with the American Competitiveness Institute who follows the auto industry, said the giveaway was "sheer genius" and "an act of exceptional bravado and political brinksmanship which proves that the entrepreneurial swagger of Henry Ford, Walter Chrysler, and old Chief Pontiac is alive and well." Asked if she thought the plan would break the ice in the Senate, Ms. Rubin said, "Once their constituents start calling and demanding their free car, there will be no stopping it. The car companies will get whatever they want."
However, others thought the plan was extremely risky, especially in the long term. "Let's say you're hoping for a minivan," said Barney Corbin, a veteran reporter for the Detroit Free Press, "and instead you get a crappy mustard yellow Saturn Ion. Or you do get a minivan but it's an unsold 2006 Buick Terraza, possibly the worst American car ever made. Or maybe you want a Cadillac and you get the Ion or the Terraza. There's no way to avoid a backlash once you circumvent the market to dump these lousy cars on consumers with unrealistic expectations."
The carmakers may also have some unrealistic expectations when it comes to the public.
"I'd be willing to give them maybe $1 or $2 billion in exchange for a free car but $14 billion? No way!" said Paul Piasecki, a veterinarian from Piedmont, California. And what does he drive? "A ten-year-old Honda Accord. It still runs great."