The executives of General Motors, Ford and Chrysler pleaded in favour of a 25 billion dollar bailout package before the senate banking committee on Tuesday, warning lawmakers that the US economy otherwise faces a "catastrophic collapse".
Automakers warned lawmakers Tuesday that the US economy faces a "catastrophic collapse" if the government does not come through with 25 billion dollars in loans needed to keep their businesses afloat.
But quick passage of the bailout seemed unlike amid opposition from the Bush administration and skeptical lawmakers who questioned whether General Motors, Ford and Chrysler would be able to pay back the loans or if the money would simply be used to "perpetuate failure."
After a heated four-hour long debate with members of the senate banking committee, executives from the Detroit Three were set to have another chance to press their case before a House of Representatives panel Wednesday.
Both GM and Chrysler have warned they could run out of money without immediate assistance from the government, and analysts have warned this would likely lead to a liquidation rather than restructuring under bankruptcy protection.
Ford is in somewhat better shape, but warned that a failure at its competitors would devastate the industry's interdependent supply base and potentially grind production to a halt at all US auto plants.
That would result in the loss of three million jobs and more than 156 billion dollars in government tax revenues in the first year, a recent study found.
"This is about much more than just Detroit," GM chairman and chief executive officer Rick Wagoner testified Tuesday.
"It's about saving the US economy from a catastrophic collapse."
Wagoner defended GM's effort to restructure its business said the company would do "everything we can to ensure the money is paid pack with interest."
"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability, and reduced industry sales to the lowest per-capita level since World War II," Wagoner said.
"Our industry, which represents America's real economy, Main Street, needs a bridge to span the financial chasm that has opened before us."
Both the White House and US Treasury Secretary Henry Paulson voiced opposition to the bailout plan Tuesday, saying Congress should instead adapt an existing 25-billion-dollar loan program aimed at helping the auto industry develop more fuel efficient vehicles.
Paulson told lawmakers that the 700 billion dollar US financial bailout program "is not a panacea for all our economic difficulties" and that "there are other ways" to prevent the failure of the domestic auto industry.
"I believe any solution must be a solution that leads to long-term viability, sustainability viability," Paulson said at a hearing of the House of Representatives Financial Services Committee.
White House press secretary Dana Perino criticized the plan developed by Democrats because it "does not require viability."
"That is going to be a test for us to be able to actually reach a compromise," Perino said, adding that the White House would continue to work with Congress and hoped to forge and agreement "this week."
But Democrats countered that the long-term competitiveness of the US auto industry would be undermined if the loans intended to help underwrite technological development were used instead to help the Detroit Three weather the current economic downturn.
House Speaker Nancy Pelosi said Tuesday that assistance would come "with strict conditions" and that automakers would be required to submit a plan by March showing that they are "able to be viable as industry."
Chrysler chairman Robert Nardelli insisted that the Detroit Three had already made substantial progress and were capable of being profitable and competitive once auto sales rebound from their current slump.
"We wouldn't be here today asking for this if we didn't have a high confidence level that we could weather the economic trough, continue to resize, make these gut-wrenching decisions to come out on the other side leaner, more agile, and for us, a higher quality, higher reliable product," he told the senate committee.
A credit crunch has made it impossible for the automakers to borrow money privately and US auto sales, which last month hit a 25-year low, are expected to sink to between 10 and 13 million vehicles next year from recent averages of 15 to 17 million.
Wagoner said GM will need 10 to 12 billion dollars to keep its operations running next year, while Nardelli and Ford chief executive officer Alan Mulally said they would each require about seven to eight billion dollars in loans.
None were willing to guarantee they would not be back for more help if the situation worsened.
Date created : 2008-11-19