US automakers warn of catastrophe without bailout

US automakers warn of catastrophe without bailout
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First Published: Wed, Nov 19 2008. 09 59 AM IST
Updated: Wed, Nov 19 2008. 09 59 AM IST
Washington: A proposed $25 billion bailout of US automakers failed to gain traction on Tuesday in the Senate despite pleas from industry that failure to act could result in wholesale liquidation.
There is strong sentiment to help General Motors Corp, Ford Motor Co, and Chrysler LLC, with loans, but doubts surfaced about the amount requested, whether Detroit companies would be healthy enough to repay it, and a general resistance to spending yet more taxpayer money on corporate rescues.
“We’re not there yet,” Christopher Dodd of Connecticut, the Banking Committee chairman said after a four-hour hearing on the auto bailout. “Trying to jam something through would be a mistake.”
Dodd and his colleagues grilled Rick Wagoner of GM, Alan Mulally of Ford and Robert Nardelli of Chrysler, who said he would work for $1 if it would help sway reluctant lawmakers to sign off on a bailout.
Nardelli said Chrysler explored bankruptcy and other options before appealing to Washington. He said Chrysler was was fragile, while Wagoner warned of a “catastrophic” shock to the US economy if insolvency struck the industry.
Ron Gettelfinger, United Auto Workers president, said inaction by Congress could result in GM, Ford and Chrysler liquidating. The three companies employ nearly 250,000 people and affect millions of other workers in related industries.
The executives did not balk at proposed bailout conditions, including Wagoner, who said GM would agree to the government taking an equity stake. GM said it needs between $10 billion and $12 billion in bailout cash, while Chrysler and Ford said about $7 billion each would help them.
But executive assurances of loan repayment, transparency, exclusively investing bailout funds in the United States, and promising to pursue fuel efficiency, did not appear to move their allies in the Senate any closer to success.
Barring an unexpected breakthrough in talks between Democrats and Republicans, who favor another option also backed by the White House, no votes are expected on the bailout before Thursday or Friday, Senate aides said.
Senate Democrats are still short of the 60 votes needed in to overcome procedural hurdles, aides and lawmakers said on Tuesday.
Reid was hopeful a deal could be reached with wavering lawmakers but raised the possibility the bailout plan would not succeed during the brief, post-election session.
Although they believe the Treasury Department already has the authority to help, Democrats have proposed amending the agency’s $700 billion rescue fund for financial services companies to include auto companies.
The White House adamantly opposes that approach, saying the fund is for businesses central to the financial system and for unfreezing credit markets.
The administration, and key Republicans like Senate Minority Leader Mitch McConnell, support amending another law - one passed in September extending $25 billion in Energy Department loans to Detroit to help it retool factories and make more fuel efficient vehicles.
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First Published: Wed, Nov 19 2008. 09 59 AM IST
More Topics: US | Autos | Congress | Bailout | General Motors |