CEOs of the Big Three are testifying before Congress for the second time in a month on Thursday and Friday to present more detailed plans of how they would use federal loans to help stay in business. Combined, the three companies have asked for $34 billion in emergency bridge loans.
“We’re here today because we made mistakes,” General Motors chief executive Rick Wagoner told the committee in prepared testimony, according to the Associated Press.
Wagoner requested an immediate $4 billion followed by another $4 billion next month.
The three executives made the trip in new-model autos made by their respective companies, two weeks after a botched attempt for aid that included harsh criticism of the corporate leaders who flew to Washington on private jets to beg for money.
Ahead of testifying, Wagoner apologized for asking for the help from taxpayers. Speaking with reporters, he said, “We wish the market conditions were better. They’re not.”
In his testimony, Chrysler CEO Bob Nardelli requested a bridge loan of $7 billion, and said the company would restructure to cut costs and invest in fuel efficient cars.
“I recognize that this is a significant amount of public money,” Nardelli said. “However we believe this is the least costly alternative considering the depth of the economic crisis and the options that we face.”
When asked by Sen. Robert Bennett, R-Utah, about a possible merger between GM and Chrysler, both Wagoner and Nardelli said they would be willing to look at such an agreement, the Detroit Free Press reported.
Chrysler CEO Bob Nardelli said: “I can tell you in my 38 years in business, I’ve never attended a more important session where more is reliant upon both the House and the Senate.”
Ford CEO Alan Mulally said in his prepared remarks that while his company isn’t in as desperate straits as rivals GM and Chrysler, his company could still use a federal guarantee of some $9 billion “as a critical backstop” in a stressed economy.
“Our plan is working, but there is clearly more to do — something that is increasingly difficult in this tough economic climate,” he said, according to the Associated Press.
But, Mulally also warned about the repercussions on the economy if either GM or Chrysler went under.
“The collapse of one or both of our domestic competitors would threaten Ford because we have 80 percent overlap in supplier networks and nearly 25 percent of Ford’s top dealers also own GM and Chrysler franchises,” Mulally said.
Sen. Richard Shelby of Alabama, the senior Republican on the panel, complained that the pricetag on the package had jumped since the three last appeared just two weeks ago.
He pressed the automakers to explain to Congress why, and to say why 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?”
The $34 billion total is larger than requests at the hearing earlier in the month, but that sum may not be enough, said Mark Zandi, the chief economist of Moody’s Economy.com. Zandi put the price tag between $75 and $125 billion over the next two years.
Banking Committee Chairman Chris Dodd, D-Conn., who supports helping the industry, said that a failure of one or more of the domestic automakers “would affect every sector of our economy.”
“In just two weeks time, the clouds on the economic horizon have grown even darker and greater in number,” Dodd said, noting the designation this week by a panel of economists that the country had entered a recession that began a full year ago.
But, he said, following the advice of those in Congress who contend the auto companies should file for bankruptcy protection rather than a taxpayer bailout “plays Russian roulette with the entire economy of the United States.”
“Inaction is no solution,” he said.
The United Auto Workers said it would make concessions in contracts with Ford Motor Co., Chrysler LLC and General Motors Corp. in order to help the struggling companies as they appeal for government aid.
On Wednesday, UAW President Ron Gettelfinger said the union would suspend the union’s highly criticized jobs bank, a program that keeps laid-off workers on the payroll.
“The jobs bank has become a soundbite that people use to beat us up,” Gettelfinger said at a news conference in Detroit.
The UAW will delay company payments to a health care trust for retirees that is scheduled to take over retiree health benefits in 2010. Gettelfinger also said that the union will consider modifying agreements made in 2007 with the automakers but added that any modification will be presented to the membership for approval.
“The real issue is the backbone of America — an industry that does more for the economy than any other industry and, quite frankly, made the middle class what it is today,” Gettelfinger said.
Union contracts with domestic automakers have been criticized for making it harder for domestic plants to compete with foreign automakers.
Supporters of government aid for the struggling industry say a collapse of the industry would have severe repercussions throughout the economy.
“The auto industry affects one in 10 jobs. Three million people will be out of work if this bridge loan doesn’t happen,” Michigan Gov. Jennifer Granholm said on the NewsHour earlier this week.