In a last-ditch bid to save their cash-strapped companies, the chiefs of the "Big Three" U.S. automakers were to plead for help from skeptical lawmakers on Nov. 18 as hope fades for a quick congressional bailout. Treasury Secretary Henry Paulson voiced opposition to the package, telling lawmakers that the $700 billion financial bailout program "is not a panacea for all our economic difficulties. The purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it."
The chairmen and CEOs of General Motors, Ford and Chrysler were to testify later on Nov. 18 to the Senate Banking, Housing and Urban Affairs Committee as Democrats mount a long-odds bid to pass a second $25 billion rescue package for the car industry. Their testimony, to be followed by an appearance before a House of Representatives panel on Nov. 19, comes as millions of jobs are threatened as the industry's crippling losses are exacerbated by the economic crisis.
In a preview of his remarks, Ford's president Alan Mulally told CNBC on Nov. 18 morning that a failure at even one automaker would have widespread consequences. "The industry is so interdependent," Mulally said. "We're nearly 10% of the U.S. GDP, and if one of the automobile manufacturers gets into serious trouble, it has just tremendous implications for the entire industry." He further warned that a bankruptcy would result in a liquidation not a restructuring because "the sales would fall so fast that you could never recover on the cost side and get out of it."
GM has warned it could run out of cash in a matter of weeks and cannot wait until president-elect Barack Obama -- who has promised to bail out the sector -- is sworn in on January 20. It launched an ad campaign warning that the entire auto industry is "facing imminent collapse" despite investing billions to restructure their business and improve quality and fuel economy. The ad warned that "a collapse would not just be an economic catastrophe, but a serious threat to our national security."
On Nov 17, Democratic Senate leaders in Congress opened a "lame duck" session vowing to fight for a new loan program for the auto industry. Senior party members condemned the reluctance of the White House and Republican leaders to siphon off funds from a $700 billion finance industry bailout which was approved in October. Senate Majority leader Harry Reid hit out at Paulson for refusing to adapt the huge bailout to aid the auto industry, saying: "All it would take is one stroke of a pen and that problem would be solved. "We are seeing a potential meltdown in the auto industry, with consequences that could directly impact millions of American workers and cause further devastation to our economy."
But the White House got in a preemptive strike before lawmakers reported bck for work, saying the special rescue funds for banks were not the answer, calling on Congress to adapt an existing $25 billion auto industry loan program. "The administration does not want U.S. automakers to fail, and in fact we support assistance to automakers," Bush's press secretary Dana Perino said. But "we believe this assistance should come from the program created by Congress that was specifically designed to assist the automakers -- from the $25 billion Department of Energy loan program," she added. "This is the appropriate funding to use for automakers rather than seeking an additional $25 billion from the TARP program" -- the Troubled Asset Relief Program, as the bailout is known.
Democratic leaders would need at least 10 Republican votes to pass the bailout in the Senate and overcome the minority's obstruction tactics with a 60-seat filibuster-proof majority. Perino pointed out that any attempt to reopen the TARP program would not make it through the Senate, and said the White House was working with Senate Republican minority leader Mitch McConnell on the issue.
A credit crunch has made it impossible for the automakers to borrow money privately and U.S. auto sales, which last month hit a 25-year low, are expected to sink to between 10 and 13 million vehicles next year from recent averages of 15 to 17 million.
Copyright Agence France-Presse, 2008