Automakers Seek Their Own Federal Bailout
The heads of Detroit's automakers asked congressional leaders Thursday for "immediate and necessary funding" to help the troubled auto industry weather an economic crisis.
The chief executives of General Motors, Ford and Chrysler, and the president of the United Auto Workers union met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid Thursday to discuss billions of dollars more in financial help for the companies.
In a statement, GM said the companies would work with Reid and Pelosi "to ensure immediate and necessary funding to keep the auto industry viable and its transformation on track during this critical time." GM said the support would "enable a competitive U.S. auto industry to contribute to our nation's economic revival." The executives declined to comment to reporters between the meetings, which were private.
They were asking for an additional $25 billion in federal loans for future health care payments for retirees.
The executives were also seeking help in accessing money from the Treasury Department or the Federal Reserve. Rep. John Dingell, D-Mich., a longtime advocate for the industry, said the meeting was productive but did not address the specifics of the industry's request.
"They're not seeking money just to spend it," he said. "They're seeking money to invest in jobs and opportunities for American workers and American industry.
In a written statement, Reid said the Bush administration "should exercise its existing authority to provide additional help to these firms," reports CBS News producer John Nolen.
Pelosi told reporters at the start of the meeting that they would discuss "how we can work together to go forward to ensure the viability of that important industry, looking out for the taxpayer and looking out for the worker."
Last month, Congress approved $25 billion in low-interest loans for domestic automakers and suppliers to retool plants to build fuel efficient vehicles. But congressional allies of the industry have said the money will not be available fast enough to help the companies.
U.S. auto sales declined to their lowest level in more than 17 years last month, prompting some auto executives to predict dire consequences if the economy doesn't improve. The companies are hoping Pelosi will include funding for the industry in an economic stimulus package if she decides to call the House back in for a lame-duck session.
Alan Reuther, the UAW's legislative director, said the executives and UAW president Ron Gettelfinger "will be making the case why additional assistance from the federal government is needed to help the companies through this severe economic credit crisis."
The Pelosi meeting with Chrysler CEO Bob Nardelli, Ford CEO Alan Mulally and GM Chairman and CEO Rick Wagoner comes at a precarious time for the industry. General Motors Corp. and Ford Motor Co. are expected to post dismal third-quarter results Friday that will show losses in the billions of dollars. Additional job cuts by both automakers also are expected Friday.
A top GM executive said Wednesday that the next 100 days will be critical for GM and the industry.
"We must be adaptable and ready to make needed changes quickly, particularly over the next 100 days," said Troy Clarke, GM's president for North America.
GM has been talking to Cerberus Capital Management LP, the majority owner of Chrysler LLC, about acquiring Chrysler. GM is reportedly seeking Chrysler's $11 billion in cash and federal aid to make the deal happen.
Auto industry officials said the companies do not intend to ask Pelosi for Congress' help in financing a merger. Gettelfinger has expressed concern that a GM acquisition of Chrysler would lead to massive job losses.
The new $25 billion in loans that the automakers want from Congress would help them make required payments to health care trust funds that were created as part of the 2007 labor deal.
Reuther said the companies are required to provide $15 billion to the fund in January 2010 and an additional $15 billion by 2012. He said the $25 billion from Congress would give the companies a better chance of immediately lining up other financing because most of the health care trust fund payments would have been covered.
"It's very important that those moneys be contributed so retirees continue to have health care," he said. "The financial community is looking at that liability, and it's a major factor in their willingness to provide loans to the companies."
The executives and Gettelfinger also want help from Congress in winning access to the $700 billion financial bailout being run by the Treasury Department and to low-rate emergency borrowing from the Federal Reserve's discount window, used in normal times by banks.
President-elect Obama expressed support for an additional $25 billion in loans on the condition that the money would go toward helping the industry build fuel efficient cars. Obama has said he would meet with industry leaders and the UAW quickly to talk about helping automakers, but a meeting has not yet been scheduled.