Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200811/20081119/article_381207.htm
Three big US automakers plead with Congress for US$25b lifeline
Created: 2008-11-19 11:10:59
THE three biggest US automakers pleaded with Congress yesterday for a US$25 billion lifeline to save their once-proud companies from collapse, warning of broader peril for the American economy as well.
Despite the automakers' pleas, the new rescue plan appeared stalled in Congress, opposed by Republicans and the Bush administration who do not want to dip into the Treasury Department's US$700 billion financial bailout program to come up with the US$25 billion.
Rank and file Republicans and Democrats from states heavily impacted by the auto industry worked in private trying to come up with a compromise that could speed some aid to the automakers before year's end. It was an uphill fight.
"Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee. He blamed the industry's predicament not on management failures but on the deepening global financial crisis.
Also, Robert Nardelli, CEO of Chrysler LLC, told the panel the bailout would be "the least costly alternative" when compared with damage from bankruptcy.
Under questioning from skeptical senators, both said they would be willing to consider slashing their salaries to US$1 to show a willingness to sacrifice for federal help.
Sympathy for the industry was sparse, however, with bailout fatigue dominating Capitol Hill. Lawmakers bristled with pent-up criticism of the auto industry, and questioned whether a stopgap loan would really cure what ails the companies.
Senate Banking Committee Chairman Christopher Dodd, a Democrat, told Wagoner and leaders of Ford Motor Co. and Chrysler LLC that the industry was "seeking treatment for wounds that were largely self-inflicted."
Still, he said, "Hundreds of thousands would lose their jobs" if the companies were allowed to collapse.
Senator Mike Enzi, a Republican, complained that the larger financial crisis "is not the only reason why the domestic auto industry is in trouble."
He cited "inefficient production" and "costly labor agreements" that put the US automakers at a disadvantage with foreign companies.
Wagoner said that despite some public perceptions that General Motors was not keeping pace with the times and technological changes, "We've moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around."
"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."
Failure of the auto industry "would be catastrophic," he said, resulting in 3 million jobs lost within the first year and "economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis."
Chrysler's Robert Nardelli sought to respond to critics who suggest the automakers seek Chapter 11 bankruptcy protection, as have some airlines that later emerged restructured and leaner.
"We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said.
Chrysler was bailed out by the federal government once before, in 1979, with US$1.2 billion in loan guarantees. The company repaid the loan, plus interest, ahead of schedule. Back then, former Chrysler CEO Lee Iacocca reduced his salary to US$1.
Under questioning from Democratic Senator Jon Tester, Ford's Alan Mulally did not join the other two executives in saying he would do the same now.
"I sure respect the intent of it, but the most important thing is that we not degrade our ability to be competitive and deliver this plan," Mulally said.
Congressional leaders worked behind the scenes to come up with a compromise that could speed some aid to the automakers before year's end. But the outlook seemed poor.
"My sense is that nothing's going to happen this week," Senator Bob Corker, a Republican, said at the opening of the hearing.
Democratic Senator Max Baucus of Montana said he also smelled a flameout. "I sense that nothing is going to be passed," the Finance Committee chairman said.
Earlier, in the House of Representatives, Representative Steny Hoyer said Congress might have to return in December -- rather than adjourning for the year this week, as expected -- to consider an auto bailout.
"Dealing with the automobile crisis is a pressing need. We are talking about a lot of people ... and a great consequence to our economy," said Hoyer, the House majority leader.
The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.
Despite the automakers' pleas, the new rescue plan appeared stalled in Congress, opposed by Republicans and the Bush administration who do not want to dip into the Treasury Department's US$700 billion financial bailout program to come up with the US$25 billion.
Rank and file Republicans and Democrats from states heavily impacted by the auto industry worked in private trying to come up with a compromise that could speed some aid to the automakers before year's end. It was an uphill fight.
"Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee. He blamed the industry's predicament not on management failures but on the deepening global financial crisis.
Also, Robert Nardelli, CEO of Chrysler LLC, told the panel the bailout would be "the least costly alternative" when compared with damage from bankruptcy.
Under questioning from skeptical senators, both said they would be willing to consider slashing their salaries to US$1 to show a willingness to sacrifice for federal help.
Sympathy for the industry was sparse, however, with bailout fatigue dominating Capitol Hill. Lawmakers bristled with pent-up criticism of the auto industry, and questioned whether a stopgap loan would really cure what ails the companies.
Senate Banking Committee Chairman Christopher Dodd, a Democrat, told Wagoner and leaders of Ford Motor Co. and Chrysler LLC that the industry was "seeking treatment for wounds that were largely self-inflicted."
Still, he said, "Hundreds of thousands would lose their jobs" if the companies were allowed to collapse.
Senator Mike Enzi, a Republican, complained that the larger financial crisis "is not the only reason why the domestic auto industry is in trouble."
He cited "inefficient production" and "costly labor agreements" that put the US automakers at a disadvantage with foreign companies.
Wagoner said that despite some public perceptions that General Motors was not keeping pace with the times and technological changes, "We've moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around."
"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."
Failure of the auto industry "would be catastrophic," he said, resulting in 3 million jobs lost within the first year and "economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis."
Chrysler's Robert Nardelli sought to respond to critics who suggest the automakers seek Chapter 11 bankruptcy protection, as have some airlines that later emerged restructured and leaner.
"We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said.
Chrysler was bailed out by the federal government once before, in 1979, with US$1.2 billion in loan guarantees. The company repaid the loan, plus interest, ahead of schedule. Back then, former Chrysler CEO Lee Iacocca reduced his salary to US$1.
Under questioning from Democratic Senator Jon Tester, Ford's Alan Mulally did not join the other two executives in saying he would do the same now.
"I sure respect the intent of it, but the most important thing is that we not degrade our ability to be competitive and deliver this plan," Mulally said.
Congressional leaders worked behind the scenes to come up with a compromise that could speed some aid to the automakers before year's end. But the outlook seemed poor.
"My sense is that nothing's going to happen this week," Senator Bob Corker, a Republican, said at the opening of the hearing.
Democratic Senator Max Baucus of Montana said he also smelled a flameout. "I sense that nothing is going to be passed," the Finance Committee chairman said.
Earlier, in the House of Representatives, Representative Steny Hoyer said Congress might have to return in December -- rather than adjourning for the year this week, as expected -- to consider an auto bailout.
"Dealing with the automobile crisis is a pressing need. We are talking about a lot of people ... and a great consequence to our economy," said Hoyer, the House majority leader.
The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.
Agencies
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