Posted on Thu, Dec. 04, 2008
last updated: November 24, 2010 01:49:32 PM
WASHINGTON — Detroit's Big Three automakers were humble, contrite and specific Thursday about why they need $34 billion in federal help quickly — but their bid still faces an uncertain future in Congress.
The executives, chastised by lawmakers last month for appearing insensitive and greedy, tried hard to say all the right things during a six-hour Senate Banking Committee hearing.
"We're here today because we made mistakes which we're learning from, because forces beyond our control have pushed us to the brink," said Rick Wagoner, the chairman and chief executive of General Motors.
He was joined by Robert Nardelli, Chrysler's chairman and chief executive, Alan Mulally, Ford's president and chief executive. They struck similar notes.
"It used to be that our approach to our customers was: If you build it they will come," Mulally said. Not anymore.
"I want you to know," he told the senators, "I heard your message loud and clear."
However, with many constituents still signaling reluctance to back the aid and no consensus on how to proceed, senators were generally sympathetic but not necessarily ready to act.
Committee Chairman Christopher Dodd, D-Conn., said after the hearing that while most of his colleagues think inaction is not an option, finding agreement in just a few days — Congress doesn't want to meet beyond next week — "is a tall order."
He was heartened by views such as those of Sen. Charles Schumer, D-N.Y. "Bankruptcy is not a viable option because it will seal the death of the auto companies," Schumer said. GM and Chrysler face bankruptcy soon unless they get help.
Many Republicans, though, remained skeptical.
Sen. Richard Shelby, R-Ala., the committee's top Republican, questioned why last month the companies sought $25 billion but now want $34 billion, and was concerned that the money would "prop up a failed business model for a few months."
Congressional leaders have called Thursday's hearing, and another Friday before the House Financial Services Committee, as crucial in gauging support for any help.
Several thorny issues still need to be resolved.
One is oversight. "I don't trust the car companies' leadership," Schumer said. "I worry if they're left on their own, they'll be back a short time later asking for more and we won't be better off."
Senators talked about an oversight board, similar to the one that kept a close watch on Chrysler when it got loan guarantees from Washington in 1980. That board was headed by the Federal Reserve Board chairman and included three Cabinet secretaries and the comptroller general. The loans were repaid with interest.
Car company executives agreed Thursday that the government could again have authority to manage any restructuring of the company's business plan, including employment, product lines, financial management and strategy.
Also complicating the outlook is the Bush administration's refusal to authorize tapping the $700 billion financial rescue fund, passed in October, to help the companies immediately.
Another factor inspiring legislative hesitation is the issue of how much the car companies will eventually need. Mark Zandi, chief economist at Moody's Economy.com, estimated that automakers would need at least $75 billion to $125 billion to avoid bankruptcy.
He based that estimate on projections that sales would remain depressed for some time, unemployment would stay high and demand for autos has been satisfied with sales incentives of recent years. The executives would neither agree nor disagree with Zandi's numbers.
Efforts to help the industry collapsed last month as lawmakers complained that the executives' style and testimony made it difficult to sell voters on the idea of giving them aid. They flew to Washington on separate corporate jets to ask for a taxpayer bailout, and they couldn't specify what they'd do with the money if they got it.
On Thursday they presented new detailed business plans, agreed to take a dollar a year in salary and drove to the hearing in fuel-efficient cars.
They appeared side-by-side with Ron Gettelfinger, the United Auto Workers union president, who backs federal help and pledged to keep negotiating with the companies.
"We recognize that the current crisis may require all stakeholders, including the workers and retirees, to make further sacrifices to ensure the future viability of the companies," he said.
Chrysler, Nardelli said, needs a $7 billion loan "to bridge the current financial crisis."
GM seeks as much as $18 billion, including $12 billion in short-term loans and a $6 billion line of credit. It intends to begin repaying the loans in 2011, with full repayment a year later as the company becomes healthy.
"We believe this success is fully achievable," Wagoner said, "if we are able to weather the ongoing global financial crisis and the lowest per-capita U.S. vehicle sales in 50 years."
Ford wants $9 billion, but Mulally noted that his company is not as weak as the others. Ford, he said, doesn't require immediate help, but wants the money as "a critical backstop or safeguard against worsening conditions as we drive transformational change in our country."
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