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Big 3 Face Stiff Challenge On Capitol Hill

Detroit's Big Three auto executives returned to Capitol Hill Wednesday to ask skeptical lawmakers for a $25 billion lifeline to keep their crippled industry from collapsing.

The heads of General Motors, Ford and Chrysler appeared before the House Financial Services Committee, making the same plea they made Tuesday to the Senate Banking Committee. But they face stiff opposition from Republicans on the Hill, as well as the White House.

Sen. Richard Shelby, the senior Republican on the Banking Committee, said Wednesday he doesn't believe there will be a turnaround in the troubled U.S. auto industry until its top management is ousted and the manufacturing model sacked.

"I don't think they have immediate plans to change their model, which is a model of failure," Shelby told CBS' The Early Show, a day after the top executives of General Motors, Ford and Chrysler came to Congress to plead for a $25 billion "bridge loan" to avert layoffs and plant closings.

"I wish they would. I know they're in dire circumstances, but somebody has to stick up for the taxpayers."

But Rep. Barney Frank, chairman of the House Financial Services Committee, told The Early Show that bankruptcy would not lead to a fresh start for the struggling companies and would only hurt others who rely on the industry.

"Bankruptcy would be very disruptive in the long term. Bankruptcy is a favorite spectator sport for politicians and experts who don't have to engage in it. You have a whole network of suppliers, small businesses and others who would get stiffed, to use the legal term, in a bankruptcy."

Frank also said bankruptcy could mean abrogation of labor contracts. "We already have too much union busting," said Frank.

Senate Majority Leader Harry Reid tried to lower expectations for emergency legislation, saying Wednesday that it's the Bush administration's responsibility to save the once-mighty carmakers from collapse.

The Nevada Democrat also said that "no one should be overly concerned" if Congress can't agree on a bill to speed $25 billion in new loans to the auto industry.

Although Reid said he still hopes Congress can reach a deal on assistance this week. If not, he said that it "will still be up to the White House and the Treasury Department" to do the job.

Local dealers also pressed their influence on Capitol Hill, blanketing congressional offices this week to make the argument to legislators that an auto bailout is necessary to prevent pillars of thousands of local communities from crumbling.

Whatever the various arguments about options, Detroit is running out of time.

Facing a less-than-receptive greeting Tuesday, General Motors Corp. CEO Rick Wagoner warned that the failure of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the country.

"This is all about a lot more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse," Wagoner said.

Dire assessments aside, the rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who are reluctant to use the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.

"You're asking an awful lot," said Sen. Christopher Dodd, D-Conn. "I'd like to tell you that in the next couple of days this is going to happen. I don't think it is."

A Senate vote on an automotive bailout plan, which would also extend jobless benefits, could come as early as Thursday, but it currently lacks the support to advance.

In an op-ed essay in Wednesday's editions of The New York Times, Mitt Romney, a candidate for this year's Republican presidential nomination, wrote: "If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed."

Romney, who was born in Detroit and whose father was an auto industry executive, wrote: "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."

Rank and file Republicans and Democrats from states heavily affected by the auto industry worked behind the scenes trying to develop a compromise that could speed some aid to the automakers before year's end. But it was an uphill fight.

Automakers were running into bailout fatigue on Capitol Hill. Lawmakers complained that many of the industry's problems were self-made, citing their past reliance upon gas-guzzling trucks and SUVs and opposition to tougher fuel efficiency regulations. Many wondered if the companies would be back for more money in a year.

"A lot of people think you've already failed, that your model has failed, that you're here to get life support," said Shelby.

Chrysler LLC CEO Bob Nardelli rejected suggestions that the automakers should seek Chapter 11 bankruptcy protection similar to airlines that later emerged restructured and leaner. "We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said. Ford Motor Co. CEO Alan Mulally said the three automakers are highly interdependent.

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

Given the concerns, Democrats in the Senate 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 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 intended to develop vehicles that use less gasoline.