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Hopes rise for auto bailout after Big Three hearing
2008-12-04
WASHINGTON (AFP) - A powerful Senate Democrat Thursday vowed to try to pass an eleventh-hour, 34-billion-dollar bailout bill for teetering Big Three auto firms after contrite industry bosses made a fresh plea for help. But President George W. Bush said Chrysler, General Motors and Ford must prove their long-term viability in order to get government loans, despite dire predictions their collapse could further cripple the US economy. Chris Dodd, chairman of the Senate banking committee held a near six-hour hearing with the Big Three bosses and pledged to work towards a congressional compromise on the bailout, warning "inaction is not a solution." "Nothing concentrates the mind like a death sentence," Dodd said, but cautioned he was not a "miracle worker" and said Congress was not about to simply write a no-strings-attached check for 34 billion dollars. It remained unclear however whether the votes yet exist to pass a bailout and Bush's intervention, in an interview with NBC News, reflected the fierce political debate about the wisdom of bailing out the sector. "No matter how important the autos are to our economy, we don't want to put good money after bad," Bush said. "In other words, we want to make sure that the plan they develop is one that ensures their long-term viability for the sake of the taxpayer." Big Three executives tried to show contrition at the hearing, after being sent back to Detroit to overhaul their restructuring plans after a first acrimonious hearing two weeks ago. They pledged to cut jobs and costs, to sell off subsidiaries, to shelve unprofitable models and develop cars which run on new generation fuels and on Thursday offered to submit their restructuring to a federal oversight board. "We're here today because we made mistakes, and we're here because forces beyond our control have pushed us to the brink," GM chairman and CEO Rick Wagoner told the Senate banking committee. Ford CEO Alan Mulally added: "Since the last hearing, I have thought a great deal about the concerns you expressed. I want you to know I heard your message loud and clear." Chrysler CEO Robert Nardelli argued his firm had been slowed by "the financial crisis that started in 2007 and accelerated at the end of the second quarter in 2008." United Auto Workers chief Ron Gettelfinger, who Wednesday made concessions on health care and benefits to help shore up the firms, warned time was short. "I believe that we could lose GM by the end of the month," he said. But Moody's Economy.com chief economist Mark Zandi testified the true cost of a bailout would be much higher than 34 billion dollars, estimating the eventual outlay at 75 to 125 billion dollars. "Sticking to the script outside bankruptcy is going to be very very difficult for them to do," he said. But the committee's top Republican Senator Richard Shelby, stuck to his opposition to a bailout. "A lot of people believe sincerely that the restructuring plans that each of your companies has provided us are not a serious set of plans," he said. In a belated public relations exercise, the executives, pilloried for swooping into the first hearing in corporate jets, drove more than 500 miles from Detroit in fuel-efficient cars. Democrats want the White House to tap an already approved 700-billion-dollar finance industry bailout to rescue the auto firms. But the Bush administration insists the money should come at least partially from 25 billion dollars in loans designed to spur development of fuel-efficient vehicles. In a new sign of GM's plight, Wagoner requested a second four-billion-dollar loan by January in addition to an already requested immediate four-billion-dollar rescue payment. Both payments would come from GM's request for 12 billion dollars in short-term loans and a six-billion-dollar line of credit requested by the firm. Mulally argued Ford's restructuring program was already working, but asked for a nine-billion-dollar line of credit in case the economy worsens. In its restructuring plan, Chrysler said it needed seven billion dollars by December 31 if it was to survive the global credit crisis, falling demand for large vehicles and a global economic slump.
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