Automakers try to sell plan to Congress

UPDATED:

The head of the Senate Banking Committee said Thursday that if the U.S. government can spend hundreds of billions of dollars to bail out the financial industry then $34 billion in taxpayer money should be used to rescue Detroit’s Big Three automakers.

Witnesses appearing before the panel in the crowded hearing room argued emphatically against the automakers declaring Chapter 11 bankruptcy as an option for restructuring, saying bankruptcy would do more harm than good.

Mark Zandi, chief economist for Moody’s Economy.com, recommended that Congress appropriate the $34 billion because a government response is “vitally needed.”

But he warned that although $34 billion may not be enough, Congress should make it clear to the carmakers that “no more government loans will be forthcoming.”

There was no immediate indication that the committee would draft legislation accepting his recommendation despite friendly questioning and an endorsement of financial help for the ailing industry by Sen. Chris Dodd, D-Conn., the panel’s chair.

But he served notice that such assistance must be accompanied by “tough conditions.”

The committee held the hearing to determine whether Congress should extend a $34 billion loan to the auto industry at a time when lawmakers already have approved $700 billion to help the nation’s financial institutions. All of the loans to the carmakers would be repaid.

The Big Three’s chief executives first appealed to Congress for help two weeks ago but were told to return with a better plan to restructure their industry to ensure its viability.

Ron Gettelfinger, president of the United Auto Workers, said the union was ready to make sacrifices to help the industry and said the automakers would collapse unless Congress loaned them money.

“If the federal government can provide a blank check to Wall Street, it also can provide an emergency bridge loan to General Motors, Ford and Chrysler,” he said.

Sen. Charles Schumer, D-N.Y., echoed Mr. Dodd’s endorsement of the bailout but said he doesn’t trust the carmakers to supervise the restructuring.

“To hand over money without enforcement is not enough,” he said.

“We can’t let the industry fail,” Mr. Schumer said. Failure, he added, “would make a sick economy sicker. Bankruptcy is not an option. We need to do something, but not bankruptcy.”

Panel members focused on the mechanics of how the government could help the industry, perhaps using the 1979 $1.5 billion Chrysler loan guarantee program as a model. Gene Dodaro, acting U.S. comptroller general, suggested creation of an oversight board.

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