TOPICS > Economy

Auto Execs Make Bailout Case to Skeptical Lawmakers

December 4, 2008 at 6:10 PM EST
Loading the player...
Executives of Detroit's Big Three auto companies appeared before the Senate Banking Committee Thursday to renew their much-debated request for billions in federal aid. Judy Woodruff reports on the hearing.
LISTEN SEE PODCASTS

TRANSCRIPT

RAY SUAREZ: Round two in automakers’ efforts to persuade lawmakers to throw them a lifeline. Judy Woodruff has our report.

JUDY WOODRUFF: Two weeks after they were roundly criticized for flying corporate jets to Washington to ask for federal help, Robert Nardelli of Chrysler, Rick Wagoner of G.M., and Alan Mulally of Ford all traded wings for wheels and drove to Capitol Hill today.

All three were back before the Senate Banking Committee to ask for aid, up to $34 billion combined in loans and lines of credit.

Today, there were three questions on the table: Should the money be provided? Where would it come from? And would the companies agree to government oversight?

Democrats and the White House remain deadlocked on the source of the money.

Committee Chair Senator Chris Dodd first invited the acting head of the Government Accountability Office, who testified that the Federal Reserve and the Treasury Department also have the authority to help the auto industry, Treasury by using some of the $700 billion passed by Congress two months ago.

Dodd said time is short.

SEN. CHRIS DODD: In my view, we need to act, not for the purpose of protecting a handful of companies. If that were the extent of the issue, I would let them fail.

I acknowledge those who advocate such a course on the assumption that pressure from the outside will produce the desired results. My concern with such an approach is that it plays Russian roulette with the entire economy of the United States. Inaction is no solution.

Arguments for, against the bailout

JUDY WOODRUFF: But there was still plenty of skepticism. Alabama Republican Richard Shelby is against granting the loans.

SEN. RICHARD SHELBY (R), Alabama: In just two short weeks, the price tag has jumped from $24 billion to $34 billion -- $25 billion to $34 billion in two weeks. I'm interested to hear what changed and why we should believe that things will get better as our economy continues to contract. Each of the automakers have based their plans on what I believe are optimistic sales forecasts.

JUDY WOODRUFF: The CEOs explained their newly crafted plans to turn things around. Rick Wagoner spoke for G.M., which is asking for $18 billion.

RICK WAGONER, CEO, General Motors: Key highlights include a renewed and expanded commitment to new technologies, especially advanced propulsion and green jobs, increased production of fuel-efficient vehicles, a reduction in the number of brands, models, and retail outlets, so we can focus our resources, and cessation of our corporate aircraft operations.

JUDY WOODRUFF: Once again, the union was there to voice its support. Ron Gettelfinger, president of the United Auto Workers, said there have been significant labor concessions. He warned against scapegoating his union's members, who have received extensive benefits over the years. He also compared the automakers' plight with the financial sector.

RON GETTELFINGER, United Auto Workers President: The UAW believes that the recent actions by the federal government to provide an enormous bailout to Citigroup reinforces the case for providing an emergency bridge loan to the Detroit-based auto companies.

Bankruptcy's impact

JUDY WOODRUFF: The committee also heard testimony from other businesses connected with the auto industry who warned of serious consequences if the money was not given soon. James Fleming is with the Connecticut Automotive Retailers Association.

JAMES FLEMING, Connecticut Automotive Retailers Association: What you're voting for here, what you're supporting here is keeping people employed in those small businesses in your district. That is what this is about.

If you say no or if you do nothing, which is essentially no, and allow bankruptcy to occur, the impact on the dealers and the people that they employ in your home states will be dramatic. People will not buy cars from a bankrupt entity.

JUDY WOODRUFF: The committee also sought the recommendation of an economist, Mark Zandi, who was pressed by the committee's top Republican, Richard Shelby, about bankruptcy options for the companies.

SEN. RICHARD SHELBY (R), Alabama: Would you please explain here -- we know it would be painful, we understand all this -- why a restructuring under Chapter 11 in your view is preferable to restructuring outside of bankruptcy, if it is?

MARK ZANDI, Chief Economist, Moody's Economy.com: I think the best option is to have a restructuring outside of bankruptcy. I think, if you can get all of those stakeholders together, and they can all agree, that's preferable to bankruptcy. Everyone's coming together.

I think failure at this point, bankruptcy at this point in time would be cataclysmic for the economy.

JUDY WOODRUFF: Chairman Dodd asked the UAW's Gettelfinger just how dire the situation was for G.M.

SEN. CHRIS DODD: How near a term do you think bankruptcy is?

RON GETTELFINGER: I do not believe at this point in time on the data that I've seen that General Motors will make it out of the end of the year.

Challenging the automakers

JUDY WOODRUFF: But some did not seem to be persuaded about helping each of the companies. Tennessee Republican Bob Corker pressed Nardelli of Chrysler about his company, which is held privately by Cerberus Capital Management. Chrysler and G.M. discussed a merger earlier in the fall, but could not obtain financing.

SEN. BOB CORKER (R), Tennessee: What your plan is about is you want to hang along -- hang around long enough so that you can date somebody and hopefully get married soon, before you run out of money.

ROBERT NARDELLI, Chrysler CEO: I can assure you, Senator, that I don't wake up every morning thinking about how to sell the company. We're busting our guts, and the people that are left there are busting their guts to make this thing work.

SEN. BOB CORKER: But there's no future for the company as a standalone. Is that correct?

ROBERT NARDELLI: I don't agree with that, sir, or I wouldn't have been here.

JUDY WOODRUFF: And Montana Democrat Jon Tester asked whether the $34 billion would be enough.

SEN. JON TESTER (D), Montana: If things stay the way they are now, are you going to be back here in a year?

ROBERT NARDELLI: I believe, sir, that we will be through -- we'll get through 2009, because we've laid in a very conservative plan.

ALAN MULALLY, CEO, Ford: If the economy and the industry degrades significantly, we would be asking for that bridge loan, too, to keep going.

JUDY WOODRUFF: Tester spoke for many on the panel in decrying bailouts already given to financial firms, which were intended to free up the credit markets.

SEN. JON TESTER: ... what the administration's done in regard to throwing hundreds of billions of dollars out the door, and the fact, when I listen to you guys testify, that you can even get credit, and that's what this was for, is nothing short of ridiculous. And I would love to have those birds in here again, because they need to be talked to, or at least get some questions answered.

JUDY WOODRUFF: Tomorrow, it's the auto executives who will be on the grill again before a House committee.