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The Real Price Of The Auto Bailout

U.S. automakers drew fresh skepticism from lawmakers Thursday in a rocky confrontation over their pleas for an expanded $34 billion rescue package they say they need to survive.

After the six-hour hearing before the Senate Banking Committee, General Motors Corp. CEO Rick Wagoner said he's optimistic that Congress will reach an agreement to help his company survive its critical cash shortage.

Wagoner said he's encouraged that Banking Committee Chairman Chris Dodd, D-Conn., expressed an interest in staying in Washington until a rescue plan can be crafted

But with time on the current Congress running out, opposition to the bailout appeared to be as strong as last week - before Detroit's Big Three auto chiefs returned to Congress with more detailed plans on how they would spend the money.

And congressional analysts said one bailout plan under consideration would fall short of what the carmakers want.

Several lawmakers in both parties are pressing the automakers to consider a so-called "pre-packaged" bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Big Three have publicly shunned the notion, saying it would kill sales by destroying customers' confidence - but executives have indicated in recent days that it might ultimately be necessary.

The executives all agreed in Thursday's hearing that a multibillion-dollar bailout deal would include a supervisory government board that could order major restructuring of the companies if deemed necessary for survival - similar to the results in many reorganizing efforts under bankruptcy law.

Perhaps the harshest dose of reality came from economist Mark Zandi, reports CBS News' Sharyl Attkisson

"The $34 billion in loans requested by the Big Three will not be sufficient for them to avoid bankruptcy at some point in the next two years. They would ultimately need, in my view, somewhere between $75 billion and $125 billion to avoid this fate."

The automakers may know that. CBS News dug into the numbers and found they're actually seeking way more money than they appear to be:

In addition to the $34 billion at issue today - $18 billion for GM, $7 billion for Chrysler and $9 billion for Ford - each company has applied for billions of dollars in federal funds from the Department of Energy, another $8 billion for GM, $8.5 billion for Chrysler and $5 billion for Ford. On top of that, they're seeking a piece of the $700 billion bailout fund aimed at Wall Street, though they haven't publicly disclosed the amounts.

That puts the real taxpayer sticker shock somewhere above $55.5 billion.

United Auto Worker union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators at that any kind of bankruptcy, even a pre-packaged one, was not "a viable option." Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.

He also warned that in the absence of action by Congress: "I believe we could lose General Motors by the end of this month." He said the situation was dire and time was of the essence.

Meanwhile, Rep. Barney Frank, a Democrat, who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said President-elect Barack Obama needs to play a more significant role on economic issues.

"He's going to have to be more assertive than he's been," Frank said at a Consumer Federation of America conference in Washington. "At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time. I'm afraid that overstates the number of presidents we have. He's got to remedy that situation."

At the Capitol building, the Big Three chief executives told the senators they hoped to make amends for past blunders. "We made mistakes, which we're learning from," General Motors chief executive Rick Wagoner said. Ford chief executive Alan Mulally also acknowledged big mistakes, saying his company's approach once was "You build it, they will come."

Chrysler CEO Bob Nardelli made similar comments in an Thursday.

"We produced more vehicles than our customers wanted, then slashed prices," he said. But as a result of these past mistakes, "we are really focused," he said.

Congressional Democrats have urged the administration to tap into an already enacted $700 billion financial bailout program to help the auto industry. The Bush administration has said that it has no intention of doing so, and would prefer aid be taken from an earlier $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.

But congressional budget analysts have privately told top Democrats that tapping that program wouldn't come close to covering the $34 billion that carmakers now say they need to survive.

It would yield only $10 billion to $15 billion in short-term loans, the analysts claimed, according to congressional officials who spoke on condition of anonymity because they were not authorized to disclose the analysis.

The Big Three executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a botched appeal for $25 billion in which they were chided for flying on private jets to beg for money.

Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would repay taxpayers by 2012 and would devote itself to manufacturing "fuel-efficient cars and trucks that people want to buy."

The Big Three executives said they would be willing to work under a federal oversight board as a condition for receiving financial aid from the government.

Dodd and several others on the panel asked them if they would agree to a setup like the one established for the U.S. bailout of Chrysler Corp. in 1979.

Sen. Mike Crapo, a Republican, said such an oversight board would be "basically a federal restructuring trustee" with some of the same powers as a bankruptcy court.

"I did not hear any objection from any of the three of you to the establishment of an oversight board or whatever we call it, of a federal oversight entity that has the literal authority to impose restructuring conditions and to enforce those as a matter of law as these dollars are utilized. Am I correct?" Crapo asked.

The three answered in the affirmative, although Ford's Mulally said, "I probably need to think about that a little bit. It sounds right, but I just don't know all of the implications of that."

Sen. Richard Shelby, the senior Republican on the panel, complained that the pricetag on the package had jumped since the trio last appeared just two weeks ago. He pressed the automakers to explain why, and to justify how such aid would not simply "prop up a failed business model for a few months ... and how are you going to pay it back to the taxpayers?"

Banking Committee Chairman Chris Dodd, a Democrat, supports helping the industry, but said that detailed plans submitted earlier this week on how the companies would use low-cost federal loans to reorganize still left a lot of questions unanswered.

But Dodd also said that doing nothing "plays Russian roulette with the entire economy of the United States."

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