WASHINGTON — The heads of the Big Three automakers of Detroit pleaded on Tuesday for emergency government aid to stave off potential collapse, but after four hours of testimony, it appeared they had not persuaded enough lawmakers to move quickly on a bailout.
Senate Democratic leaders said they had not been able to muster the support for legislation that would provide $25 billion to the troubled auto industry from the Treasury Department’s $700 billion economic rescue fund.
There is still a possibility that money may be freed up for Detroit from a previously approved loan program to help automakers retool their plants for more fuel-efficient vehicles.
But the industry hardly received a warm reception in Washington, despite its mounting troubles. The frantic bid from Detroit for help was laid bare at a packed hearing of the Senate banking committee, in which two of the three automakers said they might run out of money by the end of the year.
The cause of their misfortunes was not management mistakes, they said, but the weak economy and the inability of consumers to obtain credit to buy cars.
The executives from General Motors, Ford Motor and Chrysler seemed stunned by the general lack of confidence that lawmakers showed in their companies.
“We have little evidence that $25 billion will do anything to promote long-term success,” said Senator Michael B. Enzi, Republican of Wyoming.
UPDATE: November 21, 2008 05:07 am
There’s been a lot of political posturing about the Big Three North American auto manufacturers recently, and a lot of misinformation.
Cynical grandstanding and clever theatrics by politicians on both sides of the border have come to be expected, but misinformation about the industry, its successes, challenges and importance to the economy can be damaging.
The fact is we cannot afford to lose these companies because of short-sighted politicians, who themselves know full well we must preserve the industry in Ontario or suffer dire consequences across the country. What’s more, the Detroit Three are not asking for a “bailout,” as so often is said, but simple loan guarantees in a tough credit market.
“The current situation can only be resolved with solid, clear, accountable business plans from the automakers and their stakeholders,” Industry Minister Tony Clement said after meeting with executives of Ford, Chrysler and General Motors in Detroit, and top officials in Washington about a bailout.
“The North American automakers were restructuring before the current economic situation, and what the global financial situation has done is accelerate their need for a new business model,” he said.
“On both sides of the border, recognizing that we do indeed have an integrated market for this industry, the companies and the unions need to come up with a plan for the industry’s long-term success.”
With two of Detroit’s Big Three automakers teetering on the brink of collapse, congressional leaders yesterday refused to advance a proposal for a federal bailout, saying auto industry executives had failed to persuade lawmakers that they would make good use of the money.
Instead, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) ordered General Motors, Chrysler and Ford to submit detailed proposals by Dec. 2 explaining how an emergency infusion of government cash could put them on a path to financial health.
“It is all about accountability and viability,” Pelosi said at a news conference with Reid and other House and Senate leaders. “Until they show us the plan, we cannot show them the money.”
As hope for a bailout evaporates, GM has few other options for raising money. It is unable to sell off assets, such as its Hummer division, because potential buyers are hesitant to expand during an economic downturn. And Wall Street isn’t interested in investing in the troubled domestic auto industry.
It’s not clear where cash for the automakers would come from. Democrats had proposed carving $25 billion out of the Treasury rescue program, but the White House opposes that idea, saying the money is needed to stabilize the banking system. Administration officials favor modifying an existing $25 billion low-interest loan program aimed at helping the automakers retool their factories and build more fuel-efficient vehicles. But Pelosi has ruled that out, saying the loan program should be used for its original purpose.
Whatever the source of the cash, Sen. Christopher J. Dodd (D-Conn.), who will chair the hearings in the Senate, said $25 billion should be the upper limit when automakers rework their requests.
Dodd said he also wants to explore the idea of a bankruptcy in which the companies work out agreements to restructure with suppliers, lenders and labor, potentially supported by government help.
Bennett, who is close to Senate GOP leaders, said many Republican lawmakers also want a clear explanation of “why bankruptcy isn’t an option.”
Bob Corker (R-Tenn.), a member of the Senate Banking Committee, said auto executives “hurt themselves tremendously this week.”
| 
|