Washington Detroit’s Big Three automakers pleaded with a reluctant Congress Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, pointedly warning of a national economic catastrophe should they collapse.
Millions of layoffs would follow their demise, they said, as damaging effects rippled across an already-faltering economy.
But the new rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who don’t want to dip into the Treasury Department’s $700 billion financial bailout program to come up with the $25 billion in loans.
Rank and file Republicans and Democrats from states heavily affected by the auto industry worked behind the scenes trying to hammer out a compromise that could speed some aid to the automakers before year’s end. But it was an uphill fight.
“Our industry ... needs a bridge to span the financial chasm that has opened up before us,” General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee. He blamed the industry’s predicament not on management failures but on the deepening global financial crisis.
And Robert Nardelli, CEO of Chrysler LLC, told the panel the bailout would be “the least costly alternative” when compared with damage from bankruptcy.
Under questioning from skeptical senators, both said they’d be willing to consider slashing their salaries to $1 to show a willingness to sacrifice for federal help.
Sympathy for the industry was sparse, however, with bailout fatigue dominating Capitol Hill. Lawmakers bristled with pent-up criticism of the auto industry, and questioned whether a stopgap loan would really cure what ails the companies.
At the start of a more than four hour grilling before his committee, Sen. Christopher Dodd, D-Conn., told the leaders of GM, Chrysler and Ford Motor Co. that the industry was “seeking treatments for wounds that I believe to a large extent were self-inflicted.”
“You’re asking an awful lot,” Dodd, the panel chairman, said at the close of the session. “I’d like to tell you that in the next couple of days this is going to happen. I don’t think it is.”
Sen. Mike Enzi, R-Wyo., complained that the larger financial crisis “is not the only reason why the domestic auto industry is in trouble.”
He cited “inefficient production” and “costly labor agreements” that put the U.S. automakers at a disadvantage to foreign companies.
Ford CEO Alan Mulally, a Lawrence High School and Kansas University alumnus, told senators the auto industry was “a pillar of our economy.”
GM’s Wagoner refuted criticism that his company was not keeping pace with the times, saying it had been on the brink of a turnaround before the financial meltdown hit, reducing sales to the lowest per-capita level since World War II.
Failure of the auto industry “would be catastrophic,” he said, resulting in 3 million jobs lost within the first year and “economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis.”
Chrysler’s Nardelli sought to respond to those who suggest the automakers seek Chapter 11 bankruptcy protection, as have some airlines that later emerged restructured and leaner.
“We just cannot be confident that we will be able to successfully emerge from bankruptcy,” Nardelli said.