Auto aid deal dicey as Senate skeptics grill GM, Chrysler execs

Dems urge Bush to tap Wall Street rescue funds

Christine Tierney and David Shepardson / The Detroit News

WASHINGTON -- The chief executives of Detroit's automakers returned to Congress on Thursday offering new concessions in a desperate plea for emergency loans to keep their companies afloat but encountered fresh resistance from lawmakers.

General Motors Corp. appeared to be facing the greatest peril as the CEOs of the Big Three left the Capitol no closer to obtaining the $34 billion they have requested.

As hopes for congressional approval dimmed, House Speaker Nancy Pelosi, D-Calif., and Sen. Majority Leader Harry Reid, D-Nev., urged President George W. Bush late Thursday to tap the Wall Street rescue funds to help the automakers.

In a letter that was also signed by the heads of the committees holding hearings this week, the lawmakers said they were hopeful that they could work "cooperatively" with the administration to "provide urgent assistance and support our domestic auto industry."

The Detroit News has learned that the White House held discussions as recently as Wednesday among various Cabinet departments about how the administration could aid automakers in the event Congress cannot agree on providing funding, but Bush has not decided whether he would step in.

One issue under discussion is whether the administration could shift some of the $700 billion Wall Street bailout money to automakers if Congress doesn't act to prevent their collapse.

During a six-hour hearing Thursday, many members of the Senate Banking Committee praised the recovery plans the automakers had submitted to justify federal aid. They also acknowledged that the collapse of an auto company would have grave economic consequences.

Committee Chairman Sen. Chris Dodd, D-Conn., said doing nothing would be tantamount to playing "Russian roulette with our entire economy."

But Dodd told reporters after the hearing that he wasn't certain any deal could be made, and time was running out. "We've got to be a lot further along than where we are today" to call Congress back in session on Monday for a possible vote next week. "I don't want to raise expectations that this is going to be easy... This is a tall order to get done in three or four days."

Some Capitol Hill aides said Congress may end up approving $10 billion in aid next week, delaying a decision on the rest of the money until President-elect Barack Obama takes office. But even that might be difficult to achieve.

President Bush was noncommittal in an NBC interview Thursday: "No matter how important the autos are to our economy, we don't want to put good money after bad," he said. "We want to make sure that the plan they develop is one that ensures their long-term viability for the sake of the taxpayer."

Among Republican lawmakers, several remained adamant in their opposition to a bailout despite dire warnings about the consequences of inaction.

"I believe that we could lose General Motors by the end of this month," said United Auto Workers President Ron Gettelfinger, who joined the Big Three CEOs for the second congressional hearings in a month. The UAW agreed Wednesday to make new concessions to help save the industry.

GM and Chrysler are most urgently in need of a cash infusion. GM said it needed $4 billion this month to stay afloat as part of its $18 billion request in loans and a line of credit.

Chrysler said it needs $4 billion to get through the first quarter of 2009, while Ford Motor Co. has asked for a $9 billion "stand-by" line of credit.

The CEOs received a warmer reception than they did last month, when they were criticized for flying in corporate jets and other lavish perks and for asking for money without offering detailed plans for how they would use and repay it.

Congressional leaders opted not to vote on the loan request two weeks ago but gave the automakers 11 days to return with plans emphasizing fuel-economy and shared sacrifices at all levels.

For Thursday's hearing, GM CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler LLC CEO Robert Nardelli drove from Michigan in hybrid vehicles and pledged to return home the same way. In the restructuring plans they submitted to Congress, Wagoner and Nardelli agreed to take $1-a-year salaries, and Mulally said he'd do the same if Ford had to access the line of credit it seeks.

Several lawmakers regretted the apparent double-standard between the treatment of the financial firms that were given money with few questions asked and the demands made of the automakers. "You're paying the price because of the way some other matters were handled," Dodd said.

Of the three companies, GM offered the most comprehensive plan, proposing to restructure debt, reduce labor costs, win new labor concessions and close, shrink or sell four brands. GM also pledged to cut 21,000 to 31,000 more jobs by 2012 and close nine more factories.

Lawmakers treated Chrysler as a case apart from the other two, saying they believed the privately owned automaker was trying to stay in business long enough to attract a merger partner. Ford is in comparatively better financial shape than its crosstown rivals.

GM's plight overshadowed the hearing. The 100-year-old automaker is rapidly running out of options. "GM is the reason that we're here," Corker said.

The company has lost more than $70 billion since 2004 and its market share has slumped.

Wagoner, the CEO since 2000, sounded weary as he faced fresh questioning on whether the company needed new management. "I think the leadership team we have is the right one, but I serve at the pleasure of the board," he said.

He conceded that the company was partly to blame for its misfortunes. He even agreed to take the company into bankruptcy if an aid package required GM to meet loan conditions set by the government by March 31 and it failed to do so. Bankruptcy is an option he has repeatedly described as disastrous for GM.

"We're sorry to be asking for this support," Wagoner said. "We're here today because forces beyond our control have pushed us to the brink."

As the senators mulled various options, Robert Bennett, R-Utah, asked GM and Chrysler whether they would agree to merge to get money -- a "shotgun wedding," in his words, aimed at saving money. Wagoner said GM's liquidity needs were the top priority, while Nardelli said he would agree if a merger were a condition for receiving the loans.

Sen. Charles Schumer, D-N.Y., expressed a view common among Democrats when he said the failure of the automakers "would make a sick economy sicker".

He called for the appointment of one person -- such as the Treasury secretary -- to ensure that all stakeholders, including dealers and debt holders, make concessions in the next three or four weeks as a condition of aid. "I don't trust the car company leadership," Schumer said.

The Republican ranking member on the Senate committee, Richard Shelby of Alabama, said he still had serious doubts about aiding automakers, adding he was concerned that the request had grown from $25 billion to $34 billion in just two weeks.

Mark Zandi, chief economist of the Moody's rating agency, said he believed the cost of bailing out the industry would range between $75 billion and $125 billion -- including $25 billion in loans already approved by Congress specifically to help automakers develop more fuel-efficient cars. But the automakers received some understanding from Sen. Sherrod Brown, D-Ohio, who also noted that Wall Street banks had received much larger sums without having to go through what the auto executives CEOs have.

"We are asking extraordinary things of our witnesses today," Brown said. "We did not ask those CEOs of the banks to drive into town in a Wells Fargo armored truck" to collect tens of billions of dollars and they weren't asked for detailed plans.

Wagoner drove up to a Senate office building for the hearing in a prototype plug-in Chevy Volt.

You can reach David Shepardson at (202) 662-8735.