Chief executives of distressed US auto companies sought a $50 billion federal bailout on Thursday to survive a financial crisis blamed on a worsening economy and the “near collapse” in demand for cars.
Rick Wagoner of General Motors Corp, Alan Mulally of Ford Motor Co and Bob Nardelli of Chrysler LLC wore heavy faces while trudging through the deserted halls of Congress where they held long meetings with House Speaker Nancy Pelosi and Senate leader Harry Reid.
The three executives took back stairways and side elevators to avoid reporters, and said nothing when approached. Wagoner and Mulally were reluctant to talk ahead of Friday's quarterly earnings, which analysts expect to be dismal.
GM and Ford said in separate statements their meetings with Reid and Pelosi were frank and constructive. GM called for “immediate funding,” while the United Auto Workers (UAW) said there was “an urgent need” for federal assistance.
It is unclear whether Congress can or is willing to put together a package of loans with virtually no time remaining on the legislative calendar and an overall reluctance by the White House to bail out Detroit.
Pelosi said before the meeting that government needed to “ensure the viability” of the US auto sector, which experienced a 30% drop in sales in October and is losing billions by the month.
Industry sources with knowledge of company and labor priorities said carmakers and their union want the government to extend borrowing for $25 billion in emergency capital and another $25 billion for a health care trust to meet obligations for more than 780,000 retirees and their dependents.
The UAW has said government investment in the trust would free up corporate capital to spend on pressing needs.
One of the sources said discussions touched on company givebacks. The government has agreed to assume preferred shares and warrants in recent bank bailouts but it is unclear if that would be accepted in this case. The UAW wants limits on executive compensation as part of a bailout for the auto industry.
While Reid said Congress would “continue to explore” ways to help the industry, he nevertheless called on the Bush administration to take action on its own.
“All parties strongly encourage the administration to exercise that authority,” Reid said.
Automakers have sought to borrow from the Federal Reserve as well as receive capital injections from the Treasury Department under the ongoing corporate rescue program. Both government entities have extended some assistance in recent weeks to automaker lending arms to stimulate consumer borrowing.
“The US Treasury and the Federal Reserve can help immediately by taking steps to provide liquidity to auto manufacturers so they can get through the difficulties caused by an across-the-board decline in auto sales,” UAW President Ron Gettelfinger said in a statement.
Gettelfinger attended the meetings.
Last week the administration rejected GM's proposal for capital from the Treasury to help it finance a possible merger with Chrysler.
Executives are highlighting 4.5 million auto related jobs in the US economy and the impact of unemployment, lost wages and health benefits, pensions and tax revenue if one or more of the Big Three manufacturers were to collapse.
The White House, earlier in the day, said it would listen to any proposals to help the automakers but encouraged them to take advantage of up to $25 billion in loans approved by Congress in September to help them meet a new government mandate for making more fuel efficient cars.
The administration accelerated the regulatory review of the loan program to enable auto companies to begin applying for that financing as of Thursday. The automakers say privately that the money cannot be accessed fast enough to help them through this crisis.
Automakers also appealed to congressional Democrats for support to borrow from the Fed and Treasury.
American automakers hope President-elect Barack Obama will be more open to playing a dramatic role, if they fall short this time. He has expressed strong support for the industry on the campaign trail and was heavily backed by labor in his victory.
Democratic Rep. John Dingell of Michigan, the Energy and Commerce Committee chairman and staunch ally of Detroit manufacturers, predicted the outcome of the new request for aid would be “a good one from the standpoint of the auto industry.”
Dingell did not elaborate.
GM North America President Troy Clarke said on Wednesday the auto industry faces a critical 100-day period in which it needs to step up efforts to secure government support.
“The plunge in consumer confidence coupled with the difficulty in obtaining credit has caused the near collapse of the auto market in recent months,” Clarke said. (Reuters)