John Crawley and Kevin Drawbaugh
WASHINGTON (Reuters) - The top executives of the major U.S. automakers faced skeptical questioning on Capitol Hill as they pleaded for $34 billion in federal aid and warned of a possible collapse that would jeopardize millions of jobs.
In a critical moment for America's storied auto industry, the chief executives of General Motors Corp, Ford Motor Co and Chrysler LLC pledged to lawmakers on Thursday to refocus their businesses on higher fuel efficiency and lower production costs.
With auto sales off sharply and global credit markets sluggish, GM and Chrysler could be at the brink of failure within weeks, the CEOs and United Auto Workers (UAW) President Ron Gettelfinger told a Senate Banking Committee hearing.
"We could lose General Motors by the end of this month" without a massive government assistance package, said Gettelfinger, whose powerful union promised on Wednesday to make major concessions to help save the companies.
Detroit's once mighty Big Three came hat in hand to Washington again with no clear prospect of getting the money they seek, having failed to secure federal help two weeks ago in an earlier round of congressional hearing.
This time around the CEOs did not fly in on the corporate jets which drew sharp criticism on their last visit.
GM CEO Rick Wagoner arrived at the Capitol building in a light blue Chevrolet Volt electric prototype, but drove most of the journey from Detroit in a Chevrolet Malibu Hybrid. Ford CEO Alan Mulally showed up in a white Ford Escape Hybrid, and Chrysler's Robert Nardelli arrived in a white EV electric vehicle.
With the government showering a $700 billion bailout fund on distressed banks and Wall Street, there is wide agreement among lawmakers and the Bush administration that the automakers need help too, but deep division about how to go about it.
No resolution of the auto aid issue is expected until next week at the earliest, when the full Congress reconvenes.
The CEOs will appear at another hearing before a House of Representatives committee on Friday.
HAUNTED BY PAST FAILURES
Lawmakers are suspicious of Detroit's promises to reform, given its past failures to ween itself from gasoline guzzlers and make cars that consumers want to buy.
"I don't trust the car companies' leadership," said New York Democratic Sen. Charles Schumer at the Senate hearing.
But in a comment reflecting many lawmakers' sentiments, he added, "We can't let the industry fail."
GM wants $4 billion and Chrysler $7 billion by year's end. GM also wants another $8 billion in early 2009 and a $6 billion line of credit if its cash position deteriorates further.
Ford Motor Co says it has sufficient funds for the moment but wants access to a $9 billion line of credit.
An economist told the committee that the estimated $34 billion cost of the bailout cost could rise again. Two weeks ago, the automakers had estimated they needed $25 billion.
The industry may need $75 billion to $125 billion to avoid bankruptcy and the companies may well return asking for more money later if they get the $34 billion they want now, said Mark Zandi, chief economist of Moody's Economy.com.
"I'm skeptical, doubtful that it's going to end at $34 billion," Zandi said.
On a combined basis, sales by the three automakers plunged 40 percent in November.
The economy, already a year into recession, would suffer "severe and sweeping" damage if one or more of the automakers failed, said committee Chairman Christopher Dodd, a Connecticut Democrat.
But Alabama Sen. Richard Shelby, the top Republican on the committee, voiced doubts shared by some senators on whether taxpayer funds are well-spent helping struggling businesses.
Shelby opposed the $700-billion bailout of Wall Street and the banks and "applying the same standard, I intend to oppose bailing out the Big Three auto manufacturers," he said.
WHITE HOUSE RESERVING JUDGMENT
The three companies submitted plans to Congress Tuesday intended to show that they can still be viable businesses. Congress last month demanded the plans as conditions of any possible government assistance for the companies.
The White House said on Thursday it was too early to judge the viability plans and that the administration wanted to hear the testimony to Congress first.
The Bush administration, along with some auto state senators from both parties, has favored helping the industry by redirecting $25 billion in funds from an existing Energy Department fuel-efficiency retooling loan program.
But many Democrats oppose this and want part of the administration's $700-billion bank bailout, known as the Troubled Asset Relief Program, dedicated to automakers.
The CEOs of all three companies said they would be willing to accept some sort of oversight board as a condition of a bailout. They also said in their plans they would overhaul their business models. GM, for instance, plans to sell its Saab unit and drop its Pontiac and Saturn labels.
Wagoner confirmed at the hearing that GM had earlier considered buying out Chrysler, which is owned by private equity firm Cerberus Capital Management. He said GM lacked the cash for such a deal and bank loans were uncertain.
Chrysler's Nardelli came under sharp questioning from senators who asked whether Chrysler could survive on its own and speculated that Cerberus only wanted federal financing to tide it over until it can unload Chrysler.
"We're busting our guts" to keep Chrysler alive, Nardelli said, adding that he would not have appeared at the hearing if he did not believe Chrysler could make it on its own.
BANKRUPTCY DEBATED
GM has repeatedly dismissed filing for bankruptcy as an option, saying it would damage consumer confidence in its products. Wagoner told reporters before the hearing that bankruptcy is "not our plan" and said it would be a shame for the United States to drop out of the auto technology race.
Ford and Chrysler also object to bankruptcy to save their industry. But some lawmakers are exploring the possibility of conditioning federal aid on an speedy court restructuring of one or more of the Detroit manufacturers.
The head of the Government Accountability Office (GAO), the investigative arm of Congress, said Congress could consider a two-step approach with an immediate cash infusion to avert any collapse, followed by a program for distributing more loans over time based on certain criteria being met. ID:nWEN1307
Gene Dodaro, acting GAO comptroller general, said an oversight board could administer the financing. He added that the Bush administration has legal authority to use money from its bank rescue program to help Detroit. Moreover, Dodaro said, the Federal Reserve could step in under certain circumstances.
Shares of GM were down 16 percent to $4.10 in late afternoon trading, while Ford was off 7 percent at $2.64, both on the New York Stock Exchange.
(Reporting by John Crawley, Karey Wutkowski and Rachelle Younglai in Washington, with Kevin Krolicki and David Bailey in Detroit. Writing by Kevin Drawbaugh; Editing by Tim Dobbyn)
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