Detroit's Big 3 Make $25 Billion Plea

Beleaguered Automakers Warn Congress Of Broader Economic Peril; White House Skeptical

(CBS/AP)  Detroit's Big Three automakers pleaded with Congress on Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, 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.

"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 failures by management 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.

Sympathy for the industry was sparse.

Banking Committee Chairman 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."

Still, he said, "At a time like this, when our economic future is so tenuous, we must do all we can to ensure stability."

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.

Angus MacKenzie, editor in chief of Motor Trend, says the whole industry is "structurally all wrong."

For example, while GM and Toyota each have about 20 percent of the U.S. market, GM has eight brands and Toyota has only three, reports CBS News correspondent Anthony Mason. General Motors has 7,000 dealerships; the Japanese automaker has just 1,500.

"It's got too many people making too many products in too many factories, selling through too many dealers," MacKenzie says.

Ford CEO Alan Mulally told senators the auto industry was "a pillar of our economy. We look forward to working with you to be part of the solution" to the financial crisis. "We at Ford are well on our way to transforming our country and building a new Ford," he said.

GM's Wagoner said that despite some public perceptions that his company was not keeping pace with the times and technological changes, "we've moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around."

"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."

Failure of the auto industry "would be catastrophic," he said, resulting in three 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 critics 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.

Chrysler was bailed out by the federal government once before, in 1979, with $1.2 billion in loan guarantees. The company repaid the loan, plus interest, ahead of schedule.

Joining the Big Three CEOs, Ron Gettelfinger, president of the United Auto Workers union, said the emergency loans were important for the survival of the industry and union jobs. He said the UAW recognized that "in order for these companies to be competitive, we had to make tough calls" in labor concessions.

Congressional leaders worked behind the scenes in an effort to hammer out a compromise that could speed some aid to the automakers before year's end. But the outlook seemed poor.

"My sense is that nothing's going to happen this week," Sen. Bob Corker, R-Tenn., said at the opening of the hearing.

Earlier, Majority Leader Steny Hoyer said Congress might have to return in December - rather than adjourning for the year this week, as expected - to push through an auto bailout.

"Dealing with the automobile crisis is a pressing need. We are talking about a lot of people ... and a great consequence to our economy," said Hoyer, D-Md.

Superior Industries, a wheel maker in California, has already taken a hit, reports Mason.

"We've just closed a plant is Kansas. That will be approximately 700 people," says CEO Steven Borick, who adds that his business is down more than 30 percent this year.

The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.

In the Senate, Democrats discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September - designed to help the companies develop more fuel-efficient vehicles - to tide them over financially until President-elect Barack Obama takes office.

House Speaker Nancy Pelosi, D-Calif., and other senior Democrats, who count environmental groups among their strongest supporters, have vehemently opposed that approach because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.

Instead, they want to draw the $25 billion directly from the $700 billion Wall Street bailout - bringing the government's total aid to the car companies to $50 billion.

A Senate vote on that plan, which would also extend jobless benefits, could come as early as Thursday, but aides in both parties and lobbyists tracking the effort privately acknowledge it doesn't have the support to advance. Treasury Secretary Henry Paulson renewed the administration's opposition on Tuesday.

Even the car companies' strongest supporters conceded Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape.

"While I believe we have to have retooling going into next year, if in the short run the only way we have to be able to get some immediate help is to take a portion of that, I would very reluctantly do that - but only because I believe President-elect Obama is going to be focused on retooling and on a manufacturing strategy next year," said Sen. Debbie Stabenow, D-Mich.

Mr. Obama said he believes aid for the auto industry is needed but that it should be provided as part of a long-term plan - not simply as a blank check.

"For the auto industry to completely collapse would be a disaster in this kind of environment," Mr. Obama told 60 Minutes' Steve Kroft in an exclusive interview aired Sunday night.

The White House said the government shouldn't send any more money to the struggling auto industry on top of the already-approved loans.

"We don't think that taxpayers should be asked to throw money at a company that can't prove that it has a long-term path for success," said White House Press Secretary Dana Perino.

Sen. Mitch McConnell, R-Ky., the minority leader, said that redirecting the existing loans was "a sound way to go forward," and that he was working with Democratic Leader Harry Reid of Nevada to set a vote on such a plan.

[tonykim42]

Steve Kroft, CBS News did not ask Obama how $150,000,000.00 donation from UAW to Obama%u2019s election
helped the big 3 auto industries to avoid their bankruptcy: The executives of 3 big auto industries have been
mismanaging their extreme resources last 30 years just like Obama had been taking
advantage of the honorable Federal Student Loan System till he decided to run for the presidency!

Neither Steve Kroft, CBS News did ask Obama how Obama%u2019s life time taking
advantage of the honorable Federal Student Loan System helped the executives of Fannie
Mae & Freddie Mac, Lehman Brothers, Bear Sterns and AIG to avoid their taking advantage
of the Washington for the duration of their organizations!

Nor Steve Kroft, CBS News did remind Obama how %u201CThe drop hollows the stone,
not by its force, but by its frequency%u201D.

[bobnjersey]

[Even the car companies'' strongest supporters conceded Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape. ]

loan them money contingent on the development of more sensible vehicles (more efficient) ... and make it mandatory. those that don''t meet the expectations will have the loaned money recalled.

then institute tax incentives for consumers to buy fuel efficient cars ... ideally spurring activity in all levels of the car business ... from the retail dealer on up.

then institute an aggressive tax deduction plan intended to spur innovation and the next level of efficient vehicles. offer full deductions for monies spent on efficient cars ... make the bar high ... like 75 mpg for cars ... an equivalent high bar for trucks. any monies spent on the hyper-efficient technologies will be directly deductible from your income.

this effectively creates the market (demand) for the high-efficiency vehicles ... and then the manufacturers will build them.

... and it will never happen ... because first the lobbies for all those that will do less business will stand in the way ... then the tax revenue to the fed govt will drop due the direct deductions ... and the taxes collected from fuel/energy companies will also fall ... since people are consuming less fuel.

[craigh9]

NO, NO, NO, to a bailout. This is precisely what chapter 11 bankruptcy is for. Once they file they can shed themselves from all the contract that are dragging them down. If we give them money to continue operating as "normal" they will only be back looking for more or filing for bankruptcy protaction at that time. We need to bite the bullet and send word to the multiple entities getting in line for bail outs that enough is enough.

[wardoglrs]

United States Constitution
Article. I.
Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

[mikezembill]

The big three should get the money but a lot of strings on what they do with the money. But whith that said they will only build what the American people will buy and what the American people want is a big SUV that will get 100mpg they want there cake and eat it to. A lot of blame is on the american people when they were making the big gas suckers why didnt the American people bitc# about getting good gas milage then if they had said no to the big cars and trucks they would have made something else. And if you are selling apples for a dime and you are selling all you have and the next day you sell them for a quarter and you still sell all you have you will keep rasing the price until you have some apples left that go bad and eats up your proffit so if there is anyone to blame for the prices its the people that buy the cars and trucks.

[thechooch1]

Is there a National Security aspect to the proposed bailout? If we lose our manufacturing base would it affect our ability to provide manufacturing for the military in case of a world war? Secondly, if the big three were to go under, would the price of imported vehicles go up due to lack of competition? I don''t think we can blame this on the unions, the better place to put the blame is on the management that refused to build vehicles that got good gas mileage even after it was evident that the price of fuel was going through the roof.

[mikezembill]

formrusmcagt the foreign auto makers are getting money but not from the USA every dollar they make does not stay in this country. most of the foreign auto got tax breaks that our great grand kids will be paying for in the tune of 100 billion dollars in other words the states that have these companys sold the farm to fix the tractor. They have not been in business long enough for there retirement to have any effect on proffit. And when they do it just may just get dumped on the tax payer.

[rickwar]

And for goodness sakes does a GM truck and SUV have to cost 1/2 what a house cost.


--------------------------------------------------------------------------------

Posted by Edward1975 at 12:20 AM : Nov 19, 2008

No and neither does a Lexus, Mercedes, BMW SUV

[rickwar]

The point the Senator (farmer) from Montana made about 1/2 ton pickup fuel milage not improving appreciably in decades says it all.

Posted by Goodyu at 04:30 AM : Nov 19, 2008

Actually it doesn''t, when you factor in emission controls, weight from "mandadted" safety equipment and crash standards to maintain fuel mileage with power is better than losing mileage.

Also a pickup is a poor choice for an example, what really needs to be asked is what is the farmer doing with it? I live in farm country and pickups are regularly abused, overloaded, and beat hard. I''d bet that Mr. Senator also buys the largest engine he can instead of the more economical drivetrain or better yet a diesel.

[rickwar]

EVERY 5 YEARS OR SO, LIKE CLOCKWORK, the automakers need a multi billion dollar bailout. This has been going on since the early 1980s. Welfare is a nasty, addictive habit.

Posted by harbinger09 at 05:06 AM : Nov 19, 2008

Name the balouts and the dates other than Chrysler, which wasn''t a bailout by the way, it was a loan repaid early.

Then tell us how you feel about imports getting 100 Bil in "incentive" money from states, counties and cities since they came here.

[earache4]

"Detroit''s Big 3 Make $25 Billion Plea"

Are they still making SUV''s that get 8mpg?

[fiberglass3]

The blueprint needs to be in place first. "Big Three" tell us how you are helping to switch us over to electric?
I''m still seeing TV commercials for big SUV''s getting only 23 MPG. Sorry folks but for me to buy a new car it must be partially electric powered and at least look like new technology. Not a Model T powered vehicle! I''d rather help out some of the newer electric start up companies.

[perk235]

You GM CEO''''s sabotaged yourselves when you sabotaged the promising EV-1 electric cars, not just by torpedoing its market lure, but by cloaking, and then selling to Big Oil control of the advanced battery technology that should have debuted with the EV-1. You conspired with Big Oil and Bush to quash the CA clean-air mandate for a quota of electric cars per auto maker.
posted by Opeysheart
---------------
I would hope it''s clear by now that energy self-sufficiency is a national security issue and a great source of jobs.

Reducing consumption is a large part of the equation.

My Prius gets 50 mpg, weighs 2890 pounds, is built on a Corolla base, is a hatchback, and can carry 8 ft boards.

And I would have loved to purchase it from an American company.

[n8yvn29]

It is OK to bail out Bushs rich (and corrupt) banker buddies on Wall Street to the tune of 700 BILLION, but no help for the automakers because their workforce is unionized. Do not give me that cr.. about autoworkers making 60 dollars an hour, these rich bankers use OUR taxpayer provided 50 dollar bills to light their big stogies. And how about the crony companies that Bush awarded no-bid contracts to to support our troops? They have all moved head offices offshore to avoid paying U.S. taxes on their no-bid profits! Give me a break.

[formrusmcsgt]

This is nothing short of disgusting.

The "big three" have, for years, turned a blind eye while foreign automakers were developing hybrids and fuel cell technology choosing to market and produce trucks and SUV''s instead.

Now, we''re supposed to pick up the tab for their short-sightedness.

You don''t see Toyota, Nissan, or Daimler-Benz begging for cash to stay afloat do you?

Disgusting.

[harbinger09]

Why don''''t we bailout Social Security?
At $74 per hour ($148,000 per year), these autoworkers are making almost as much money as Obama will be making as President of the United States. For What? For some uneducated person who put a nut on a bolt for 30 years. What has the UAW done for me, the USA or any citizen.
These self centered over paid UAW employees has caused the cost to buy a US made car be twice what it should be and then they make them so the fall apart so we have to pay to get them fixed.
Why should I or my child pay to support these self centered over paid UAW employees?
Let the UAW employees get a real job and stop wanting me to support them.

Posted by Buckscc at 03:40 AM : Nov 19, 2008


Where do you get your info? My brother, dad and mom all worked for either Chrysler or Delco (when it was Delco) in their hey day, base pay was 26.50/hour and that was in the late 1970''s for trade. After the first bailouts, the starting pay for factory workers was 13.50/hour. It supposedly goes up to 22.50/hour after a few years. Even skilled trade does not make 74/hour. Get informed or ****.

[harbinger09]

EVERY 5 YEARS OR SO, LIKE CLOCKWORK, the automakers need a multi billion dollar bailout. This has been going on since the early 1980s. Welfare is a nasty, addictive habit.

I would not be surprised if periodic money from the government is not routinely factored into the automakers'' fiscal projections.

NO BAILOUT. sink or swim like most other companies.

[goodyu]

I can''t believe those three guys sitting up there, mewling for money with no blueprint, not even a scintilla of a plan other than more of the same to make their case.

The point the Senator (farmer) from Montana made about 1/2 ton pickup fuel milage not improving appreciably in decades says it all.

To boot, Nardelli was the only one that would agree to take a "symbolic" pay cut (a la Iacocca)for morale''s sake. I guess he hasn''t burned through his $210 large from Home Depot yet.

Maybe Steve Jobs would be interested in running a car company???

[buckscc]

Why don''t we bailout Social Security?
At $74 per hour ($148,000 per year), these autoworkers are making almost as much money as Obama will be making as President of the United States. For What? For some uneducated person who put a nut on a bolt for 30 years. What has the UAW done for me, the USA or any citizen.
These self centered over paid UAW employees has caused the cost to buy a US made car be twice what it should be and then they make them so the fall apart so we have to pay to get them fixed.
Why should I or my child pay to support these self centered over paid UAW employees?
Let the UAW employees get a real job and stop wanting me to support them.

[tiredofthebs]

The (auto) industry could always seek financial aid from the UAW.