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 programme to come up with the US$25 billion. -- PHOTO: REUTERS
WASHINGTON - THE three biggest US automakers pleaded with Congress on Tuesday for a US$25 billion (S$38.2 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 programme to come up with the US$25 billion.
US economy faces 'catastrophic collapse' without auto bailout: GM
WASHINGTON - THE US economy will face a 'catastrophic collapse' if the government does not bail out the automotive industry, the head of General Motors told lawmakers on Tuesday.
'This is about much more than just Detroit', GM chairman and chief executive officer Rick Wagoner said as he joined executives from Ford, Chrysler and the United Auto Workers Union to plead for US$25 billion (S$38.2 billion) in government-backed loans.
Chrysler could run out of cash without 'immediate' help
DETROIT - CHRYSLER CEO Robert Nardelli says the automaker needs immediate federal help or its cash could fall short of the amount needed to stay in business.
Nardelli told the Senate Banking Committee on Tuesday that Chrysler LLC pays out US$4 billion (S$6.1 billion) to US$5 billion per month in salaries, bills from parts suppliers and all other costs.
OTTAWA - THE failure of the Big Three US automakers would 'devastate' the Canadian economy, the head of the Canadian Auto Workers (CAW) union said on Tuesday, urging Ottawa and Washington to come to their aid.
Their insolvency would be a 'devastating blow to the economy, a devastating blow to consumers out there and quite frankly devastating to our members,' CAW president Ken Lewenza told broadcaster CTV.
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 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, Mr Robert Nardelli, CEO of Chrysler, 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.
At the start of a grilling before his committee that lasted more than fours, Democratic Sen Christopher Dodd told the leaders of GM, Chrysler and Ford Motor that the industry was 'seeking treatments for wounds that I believe to a large extent were self-inflicted'.
Still, he said, 'Hundreds of thousands would lose their jobs' if the companies were allowed to collapse.
'You're asking an awful lot', Mr Dodd, the panel chairman, said at the close of the session. 'I'd like to tell that you in the next couple of days this is going to happen. I don't think it is'.
Sen 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 labour agreements' that put the US automakers at a disadvantage with foreign companies.
Mr 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', Mr 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 Sen 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', Mr Mulally said.
Congressional leaders worked behind the scenes in an effort 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', Sen Bob Corker, a Republican, said at the opening of the hearing.
Democratic Sen 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, Rep 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 Mr 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.
In the Senate, Democrats discussed but rejected the option favored by the White House and Republican lawmakers to let the auto industry use a US$25 billion loan program created by Congress in September, which was designed to help the companies develop more fuel-efficient vehicles, to tide them over financially until President-elect Barack Obama takes office in January.
'There was no indication that there was any traction' for the White House plan, Sen Ben Nelson said after a Democratic luncheon.
The leader of the House, Speaker Nancy Pelosi, and other senior Democrats, who count environmental groups among their strongest supporters, have opposed that approach vehemently because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.
'I don't think that's going very far in our caucus', said Senate Majority Leader Harry Reid.
Instead, they want to draw the US$25 billion directly from the US$700 billion Wall Street bailout, which would bring the government's total aid to the car companies to US$50 billion.
A Senate vote on that plan, which also would extend jobless benefits, could come as early as Thursday, but aides in both parties and lobbyists tracking the effort privately acknowledge it does not have the support to advance. Treasury Secretary Henry Paulson renewed the administration's opposition on Tuesday.
Even the car companies' strongest supporters conceded on Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape. -- AP
