- The Washington Times - Friday, December 5, 2008

UPDATED:

Chastened Big Three auto executives told Congress on Thursday that they are prepared to take painful steps to qualify for a $34 billion federal bailout to stave off insolvency, including a proposed shotgun merger of General Motors Corp. and Chrysler LLC.

Lawmakers are skeptical that Congress will pass a deal, and House Speaker Nancy Pelosi has said bankruptcy isn’t an option. So Democrats were looking for ways to force the Bush administration to act on its own to rescue the automakers.

Commerce Secretary Carlos Gutierrez said one option would be voluntary bankruptcy as a way to restructure debts, costs and business lines.

“The bankruptcy would need to be, for it to be carried out in a successful fashion, would need to be a decision made by the companies,” he told The Washington Times in an interview. “What we would not like to see is a disorderly bankruptcy, where it becomes a function of the companies having failed. We want these companies to succeed.”

Testifying before the Senate Banking, Housing and Urban Affairs Committee, GM Chairman and Chief Executive Officer Rick Wagoner, Ford Motor Co. chief Alan R. Mulally, Chrysler LLC Chairman and CEO Robert Nardelli and United Auto Workers President Ron Gettelfinger all rejected the idea of a bankruptcy reorganization, saying customers would instantly flee from any company that made such a filing.

But the executives said they would be willing to accept strict federal oversight of any bailout money, would pay back all federal loans and would agree to virtually any other conditions in exchange for the money.

Sen. Robert F. Bennett, Utah Republican, asked Mr. Nardelli whether Chrysler would agree to merge with GM - a step many private analysts say the overbuilt U.S. industry must take - as a condition for aid.

The Chrysler executive noted that he would be the first to lose his job in a merger, but said he would agree if Congress required it.

“If in fact that’s the criteria that means we get money to save Chrysler and the people who have worked there for 80-some years, I would do it,” Mr. Nardelli said.

Lawmakers have several options, including fully funding the auto industry request and providing a smaller “bridge loan” to tide over the companies until the Obama administration takes office.

Congressional Democrats and the White House are publicly feuding about where to get the money, and some in Congress are trying to make President Bush act.

“There is talk about ways to push it off on the president,” a House Democratic leadership aide said.

Banking committee Chairman Christopher J. Dodd, Connecticut Democrat, expressed frustration over the refusal of the Bush administration to tap the $700 billion financial industry bailout fund to help the car companies. He said he had invited Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke to testify but both declined.

Gene L. Dodaro, the government’s acting comptroller general, said Thursday that the Treasury and the Federal Reserve have authority under existing legislation to offer aid to the auto industry.

Late Thursday, auto-state lawmakers threatened to block the administration’s access to the second half of the financial bailout fund unless it made “a firm commitment to assist working Americans and save American jobs,” a clear implication that the lawmakers would block Wall Street bailout money without help for Detroit’s Big Three.

“I think they’ll read between the lines,” said Rep. Fred Upton, Michigan Republican, who teamed with Democratic Rep. John Dingell, also of Michigan, in a letter to colleagues outlining their position.

The October financial-bailout legislation allows Congress to block Treasury Department access to the second installment of $350 billion, although such a measure would almost certainly meet a presidential veto and then need a two-thirds supermajority to override.

The administration insists that the financial bailout money is needed to deal with the global credit crunch and has suggested that Congress reprogram an existing $25 billion Department of Energy loan program for the Big Three to build fuel-efficient cars. But Mrs. Pelosi, California Democrat, and leading environmental groups oppose that option.

Mr. Wagoner said GM needs $4 billion in federally backed loans by the end of the month just to stay in business and another $4 billion in January. Chrysler said it needs $7 billion in the same time period to remain solvent.

GM said it would need an additional $10 billion for future restructuring efforts, but could repay the money by 2012. Chrysler, which is privately owned, said it would start repaying the money in 2012.

Ford, considered the most financially viable of the Big Three, said it did not need money in the near term, but is asking for a $9 billion standby line of credit.

Mr. Dodd said he has concluded that Congress needs to act, but added that it would be difficult for House and Senate negotiators to create a workable plan in the few days available for a lame-duck session.

Citing the immense economic clout of the auto industry and its dependent industries, Mr. Dodd said government inaction “would be playing Russian roulette with our entire economy.”

Sen. Richard C. Shelby of Alabama, the panel’s ranking Republican, said he remained opposed to a federal bailout. He noted that the Big Three’s request had swelled from $25 billion two weeks ago to up to $34 billion now.

“At our last hearing, I asked whether this was the end or just the beginning” of the rescue effort, Mr. Shelby said. “We now have an answer.”

Mark Zandi, chief economist of Moody’s Economy.com, told the Senate panel that the $34 billion sought by the Big Three was likely only a down payment on what it will cost over the next two years to prevent a bankruptcy.

While saying he supported emergency government aid to Detroit in the face of a severe overall recession, Mr. Zandi estimated that the three companies “would ultimately need $75 billion to $125 billion to avoid a bankruptcy filing.”

The reception for the three auto chiefs at the daylong hearing Thursday was far less hostile than when they first approached Capitol Hill for help in mid-November.

That visit was widely panned as a public relations disaster. Lawmakers criticized the Big Three for submitting vague aid requests and for the revelation that all three top executives flew to Washington on private corporate jets.

This time, the three men drove to Washington in fuel-efficient company-made cars, which were parked prominently outside the Senate office building as they testified.

“It’s fair to say that last month’s hearing were difficult for us,” Mr. Wagoner told the Senate panel. “But we learned a lot.”

“We’re here because we made mistakes, and we’re here because forces beyond our control have pushed us to the brink.”

Mr. Gutierrez praised the decision to leave the corporate jets home.

“Symbolism has its place, symbolism is important,” he said. “They’re not going to become a viable company by driving their own car, so while symbolism is very important and it has a role, we also have to keep our eye on the substance of what it takes to be a viable company.”

• S.A. Miller contributed to this article.

Copyright © 2016 The Washington Times, LLC. Click here for reprint permission.

blog comments powered by Disqus

 

Click to Read More

Click to Hide