Washington: The chief executives of General Motors Corp and Chrysler LLC said they would consider restarting merger talks if needed to win their slice of up to $34 billion in emergency US government aid.
“I would be very willing to look at it seriously,” GM CEO Rick Wagoner told the Senate Banking Committee on Thursday, adding that merger talks earlier this year were dropped on concerns GM did not have the financing to merge with Chrysler.
Chrysler CEO Robert Nardelli said his job would likely be the first to go in a merger with GM, but if that would save Chrysler and its workers “I would do it.”
Leaving their corporate jets in Detroit and driving to Washington, the chiefs of the Big Three automakers, including Ford Motor Co CEO Alan Mulally, pledged to refocus on higher fuel efficiency vehicles and lower production costs.
But they encountered deep skepticism among lawmakers who are suspicious of such promises, given the companies’ past failures to ween themselves from gasoline guzzlers and to make innovative cars that consumers want to buy.
Most lawmakers want to help Detroit, but existing bailout proposals are stuck in a political gridlock between administrations, with President George W. Bush a lame duck, and President-elect Barack Obama waiting to be sworn in 20 January.
No action on aid is expected before next week and perhaps not even then, despite dire warnings at the hearing that GM could collapse by the end of December without aid.
The CEOs will appear before the House of Representatives Financial Services Committee on Friday.
With the government showering a $700 billion bailout fund on distressed banks and Wall Street, there is wide agreement among lawmakers and the Bush administration that the automakers need help too, but deep division about how to go about it.
The Federal Reserve could also make a loan to automakers in some circumstances.
The Fed is expected to send a letter to Dodd on Friday explaining how it must obtain sufficient collateral under law to make any emergency loans, a source familiar with the letter told Reuters on Thursday.
Bailout could grow
GM wants $4 billion and Chrysler $7 billion by year’s end. GM also wants another $8 billion in early 2009 and a $6 billion line of credit if its cash position erodes further. Ford says it has enough funds now but wants a $9 billion line of credit.
An economist told the committee that the estimated $34 billion overall cost of the bailout cost could rise. Two weeks ago, the automakers had estimated they needed $25 billion.
The industry may need $75 billion to $125 billion to avoid bankruptcy and the companies may well return asking for more money later if they get the $34 billion they want now, said Mark Zandi, chief economist of Moody’s Economy.com.
The three companies submitted plans to Congress on Tuesday intended to show that they can still be viable businesses. Congress last month demanded the plans.
They also vowed to reshape their business models. For instance, GM - the world’s largest automaker - plans to sell its Saab unit and drop its Pontiac and Saturn labels.
All three automakers dismiss filing for bankruptcy protection, but some lawmakers are exploring the possibility of conditioning federal aid on an speedy court restructuring of one or more of the Detroit manufacturers.