WASHINGTON — American auto executives, stung by declining sales and unprecedented turmoil in credit markets, are braced for a tense showdown this week with still-skeptical lawmakers over whether the federal government will give them a $25 billion lifeline.
Detroit's Big Three, expected to detail Tuesday how they'd use the money, face two challenges: They must overcome a perception that they're insensitive and greedy, and they must persuade Congress that they can change their companies radically and quickly.
"This is an important week, because it will enable them to show what they weren't ready to show a couple of weeks ago," Commerce Secretary Carlos Gutierrez said in an interview with McClatchy.
Last month, executives from General Motors Corp., Ford Motor Co. and Chrysler LLC went home empty-handed, wounded by their own lack of specificity as well as their admission that they'd flown to Washington in corporate jets to beg for a taxpayer handout.
All three companies, though, are quickly burning through cash, and GM and Chrysler could face bankruptcy by the end of the year. They have powerful friends on Capitol Hill eager to help, but as House Financial Services Committee Chairman Barney Frank, D-Mass., put it, "We've joined hands to do what we can to help the auto industry, but we can only do that if they help themselves."
The companies are scheduled to defend their new plans before the Senate Banking Committee on Thursday and the House Financial Services Committee on Friday.
When they appeared before the same committees last month, even their usual congressional supporters came away frustrated.
"They just weren't saying anything," said Senate Banking Committee Chairman Christopher Dodd, D-Conn.
To win over lawmakers, the executives first need to present a softer image.
"Don't take the corporate jet," advised Rebecca Lindland, the director of industry research at IHS Global Insight in Lexington, Mass.
Some have gotten the message. "We have more efficient ways of getting executives where they need to be" than corporate jets, said Shawn Morgan, a Chrysler spokeswoman.
Last month, many lawmakers said they simply couldn't go home to constituents who were struggling to keep their jobs and pay bills and explain why well-heeled auto industry leaders weren't accountable for their corporate missteps.
In that spirit, Rep. James Clyburn, D-S.C., the third-ranking Democrat in the House of Representatives, said Monday that one condition of any federal aid should be a requirement that all three auto executives step down.
John Podesta, who's helping to manage President-elect Barack Obama's transition, said that the U.S. government should demand changes from anyone who gets taxpayer relief, whether it be automakers or Citigroup Inc.
"It seems to me that the government ought to demand accountability," including on executive compensation, Podesta said in an interview on Bloomberg Television. "If we're going to have one rule, we ought to apply it to all of the financial institutions that we're taking a look at," he said. "That's my personal opinion."
Dodd also said that some sacrificial gesture was needed, perhaps a vow to take only a dollar a year in salary. Former Chrysler President Lee Iacocca accepted a dollar a year when his company was reeling 30 years ago — and got $1.5 billion in federal loans, which it repaid in three years, with interest.
Robert Nardelli, the current Chrysler chief executive officer, told senators last month that he'd do the same if it would help his firm get federal help. General Motors Chairman Rick Wagoner wouldn't go along, saying instead: "I would be willing to contribute to the sacrifice." Ford President and CEO Alan Mulally called a dollar a year salary "a symbolic gesture" but didn't discuss cutting his own pay.
If the automakers can boost their approval rating, the committees can turn to their more substantive task: looking at the companies' blueprints for change.
The Bush administration opposed the approach that many Democrats favored: taking money from the $700 billion financial-rescue plan. The administration argued that the companies could use an already approved $25 billion loan aimed at helping them become more fuel-efficient. Democrats objected, saying that would set back environmental goals.
The administration wants to see cuts in labor, management and retiree benefits. House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., spelled out exactly what they wanted in a letter to the auto executives.
Among their requests are details of the companies' current operating cash positions and short-term needs, assuring that "taxpayers get paid back first." The two lawmakers also want to bar payments of dividends and "excessive executive compensation," such as bonuses or "golden parachute" severance packages.
Sen. Claire McCaskill, D-Mo., said that her colleagues must have a plan they could explain to skeptical constituents. "We need to behave like a bank," she said, and give the three companies the same kind of scrutiny that any prospective lender would give.
Gutierrez said the auto executives faced a hard challenge.
"What they . . . saw when they were here is that perception matters, and they do have to find a balance and a way of addressing both" substance and image, he said. "But we can't go to the other extreme, and assume it's only about perception."
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