Automakers try to sell Congress on rescue - WMC Action News 5 - Memphis, Tennessee

Automakers try to sell Congress on rescue

WASHINGTON (AP) - Humbled U.S. automakers pleaded with Congress Thursday for an expanded $34 billion rescue package, but heard fresh skepticism in a bumpy encore appearance.

"We made mistakes, which we're learning from," General Motors chief executive Rick Wagoner told the Senate Banking Committee.

United Auto Worker union President Ron Gettelfinger warned bluntly that in the absence of action by Congress: "I believe we could lose General Motors by the end of this month." He said the situation was dire and that time was of the essence.

Ford CEO Alan Mulally also acknowledged big mistakes, saying his company's mantra once was "You build it, they will come."

"We produced more vehicles than our customers wanted, then slashed prices," he said. But as a result of these past mistakes, "we are really focused," he said.

The Big Three executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a botched appeal for $25 billion in which they were chided for flying on private jets to beg for money.

Chrysler CEO Bob Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would repay taxpayers by 2012 and would devote itself to manufacturing "fuel-efficient cars and trucks that people want to buy."

Sen. Richard Shelby of Alabama, the senior Republican on the panel, complained that the pricetag on the package had jumped since the trio last appeared just two weeks ago. He pressed the automakers to explain why, and to justify how such aid would not simply "prop up a failed business model for a few months ... and how are you going to pay it back to the taxpayers?"

Banking Committee Chairman Chris Dodd, D-Conn., supports helping the industry, but said that detailed plans submitted earlier this week on how the companies would use low-cost federal loans to reorganize still left a lot of questions unanswered.

But Dodd also said that doing nothing "plays Russian roulette with the entire economy of the United States."

Several lawmakers in both parties, including Dodd, have pressed the automakers in recent days to consider a so-called "pre-packaged" bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Big Three have publicly shunned the notion, but executives have indicated in recent days that it might ultimately be necessary.

GM's survival plan envisions an administration-led restructuring overseen by a government oversight board.

"If more extensive restructuring is required, GM will work with the oversight board to determine the additional necessary actions," GM's written plan said.

Gettelfinger told the committee, "We are prepared to do our part." But he also said workers for the auto companies shouldn't have to make disproportionate sacrifices.

Congressional Democrats have urged the administration to tap into an already enacted $700 billion financial bailout program to help the auto industry. The administration has said that it has no intention of doing so, and would prefer aid be taken from an earlier $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.

Congressional budget analysts, however, have privately told top Democrats that tapping that program wouldn't come close to covering the $34 billion that carmakers now say they need to survive. It would yield only $10 billion to $15 billion in short-term loans, the analysts claimed, according to congressional officials who spoke on condition of anonymity because they were not authorized to disclose the analysis.

Treasury Secretary Henry Paulson has said that the main $700 billion bailout program is intended only to be used for the financial industry.

Gene L. Dodaro, the top official at Congress' watchdog agency - the Government Accountability Office - agreed with Dodd that the $700 billion package set up in October "is worded broadly enough" to permit it to be tapped for the automakers.

Dodaro testified that the Federal Reserve also has the authority under existing law to make loans to the domestic auto industry if it so chooses. 

Dodd said that both Paulson and Fed Chairman Ben Bernanke had been invited to testify at Thursday's hearing, but had declined.

Earlier, Senate Majority Leader Harry Reid, D-Nev., said prospects for Congress to act this year seemed slim.

"I just don't think we have the votes to do that now," he told The Associated Press.

The Big Three are struggling to stay afloat during the longest economic downturn in at least a quarter century, a steep decline in sales and a tight credit market. The three burned through nearly $18 billion in cash reserves during the last quarter.

The bailout remains unpopular with the public. Sixty-one percent oppose providing the auto companies with billions in federal assistance, according to a CNN-Opinion Research Corp. poll released on Wednesday. Fifty-three percent said it would not help the country's economy.

(Copyright 2008 by The Associated Press.  All Rights Reserved.)

Powered by Frankly