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Latest update : 2008-12-06

Top executives of the largest US auto companies left meetings with lawmakers without assurances of a bailout. Their collapse could exacerbate the unemployment crisis in the US.


REUTERS - Top auto executives left a two-day grilling by lawmakers with a bailout still in doubt and a senior lawmaker warning of disaster if a U.S. car company collapse occurs as the economy loses jobs at an alarming pace.


With new data showing U.S. employers axed more than 533,000 jobs in November -- the highest monthly job-loss in 34 years -- Rep. Barney Frank urged the White House on Friday to use money from a $700 billion bank bailout program to assist Detroit.


But President George W. Bush gave no indication his administration would agree. He instead urged Congress to act next week to modify a $25 billion Energy Department loan program for making more fuel-efficient cars as a bailout remedy, an approach Democratic leaders oppose.


The chief executives of General Motors Corp, Ford Motor Co, and Chrysler Corp wrapped up their second visit to Washington in as many weeks without a clear path to the $34 billion in loans they are seeking.


Frank, the Massachusetts Democrat who chairs the House of Representatives Financial Services Committee, said the economy would be devastated if an automaker were forced into bankruptcy or shut down.


"In the midst of the worst economic situation since the Great Depression it would be an unmitigated disaster," he told a hearing with the CEOs.


Frank said there was a "pretty broad consensus" among committee members to assist Detroit, which he called a step forward. But that sentiment alone "doesn't quite get us there," and said he would be talking with other lawmakers about the form of a bailout bill.


While many lawmakers are anxious to see Detroit survive, Republicans have been wary of whether the money would really help, and Democrats have been inclined to be generous to the huge employers of unionized labor.


KeyBanc Capital Markets Senior Automotive Analyst Brett Hoselton said, "We continue to believe there is a better than 50 percent probability something gets done (to aid automakers)."


The Wall Street Journal reported that Chrysler, thought the most fragile of the three, has hired the Jones Day law firm as its bankruptcy counsel.


GM and Chrysler want immediate loans to forestall possible failure, while Ford is asking for a $9 billion credit line that would be tapped later if necessary. GM wants $12 billion in loans, with $4 billion of that immediately, as well as a $6 billion credit line. Chrysler wants $7 billion.


Chrysler CEO Bob Nardelli told Frank's panel that the company needs $4 billion to run operations through March. Over the same time frame, GM CEO Rick Wagoner said his company needs $10 billion to keep going.


Ford CEO Alan Mulally said again that his company does not immediately need to use federal funds.




The White House refuses to carve out for Detroit some of the $700 billion bailout it is already showering on Wall Street and the banks, saying that money is intended only to help stabilize the financial sector.


Bush said he was concerned about taxpayer money going to companies that may not survive but said modification of the fuel-efficiency loans could help worthy auto companies.


"It is important that Congress act next week on this plan," he told reporters.


Congressional Democrats insist the administration should help the automakers with money from the bank bailout -- the Troubled Asset Relief Program (TARP).


Michigan Republican Rep. Thaddeus McCotter proposed a $25 billion automaker bridge loan drawn half from the TARP and half from the Energy Department program.


Asked about such a compromise on Thursday, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, called it "a reasonable idea," although just one of many.


Under McCotter's proposal, Congress also would refuse to release the second $350 million in TARP funding and compel the CEOs of financial institutions benefiting from the TARP to appear before Congress to testify.


U.S. employers cut the most jobs in November since 1974, the Labor Department said on Friday. The unemployment rate rose to 6.7 percent from 6.5 percent in October.


On a combined basis, GM, Ford and Chrysler have cut more than 100,000 factory jobs since sales began to slow in 2006.


GM said on Friday it will lay off 2,000 unionized workers and eliminate a production shift at three plants in Michigan, Ohio and Canada.


"This is about survival at this point in time. There's going to be, unfortunately, (job) losses," United Auto Workers President Ron Gettelfinger told lawmakers.


"We can't sugarcoat it, we can't stick our heads in the sand," said Gettelfinger.


GM shares were down 2.4 percent to $4.01 and Ford shares were up 1.9 percent to $2.71 in afternoon trade on the New York Stock Exchange.


Chrysler is owned by private equity firm Cerberus Capital Management.

Date created : 2008-12-05