Automakers Pitch Congress Anew on Rescue

By  | 

WASHINGTON – Humbled U.S. automakers pleaded with Congress Thursday for an expanded $34 billion rescue package, but heard fresh skepticism in a bumpy encore appearance.

"We're here today because we made mistakes," General Motors chief executive Rick Wagoner told the Senate Banking Committee in prepared testimony.

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 corporate leaders who flew here on private jets to beg for money.

Ahead of testifying before the Senate Banking Committee, Wagoner apologized for asking for the help from taxpayers. Speaking with reporters, he said, "We wish the market conditions were better. They're not."

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."

"Our plan is working, but there is clearly more to do — something that is increasingly difficult in this tough economic climate," he said.

Sen. Richard Shelby of Alabama, 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, D-Conn., who supports helping the industry, said detailed plans submitted to Congress earlier this week by the three auto companies on how they would use low-cost federal loans to reorganize still left a lot of questions unanswered.

Still, Dodd said, the economic news has become even more bleak since the auto executives appeared before Congress in late November.

"In just two weeks time, the clouds on the economic horizon have grown even darker and greater in number," Dodd said, noting the authoritative 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," Dodd said.

Dodd echoed the stance of other Democratic leaders in complaining that the administration was not tapping into an already enacted $700 billion financial bailout to help the auto industry.

The 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.

Treasury Secretary Henry Paulson has said that the $700 billion program is intended only to be used for the financial industry.

Gene L. Dodaro, the top official at Congress' watchdog agency — the Government Accountability Office — agreed with Dodd that the $700 billion package set up in October "is worded broadly enough" to permit it to be tapped for the automakers.

Dodaro testified that the Federal Reserve also has the authority under existing law to make loans to the domestic auto industry if it so chooses.

Dodd said that both Paulson and Fed Chairman Ben Bernanke had been invited to testify at Thursday's hearing, but had declined.

Earlier, Senate Majority Leader Harry Reid, D-Nev., said prospects for Congress to act this year seemed slim.

"I just don't think we have the votes to do that now," he told The Associated Press.

Critics say the companies have been poorly managed and failed to show they won't be back for another government rescue.

In the streets outside the Capitol, all three companies were showcasing their futuristic, environmentally friendly models in hopes of counteracting their image as purveyors of gas-guzzling SUVs.

The three executives made the 520-mile trip from Detroit in hybrid cars — a nod to stinging criticism from lawmakers for making their last trip in corporate jets.

Congressional leaders have said Thursday's Senate hearing — and a companion one on Friday before a counterpart House panel — would help determine whether Congress will take up an auto rescue package in a special lame-duck session next week.

The Big Three are struggling to stay afloat during the longest economic downturn in at least a quarter century, a steep decline in sales and a tight credit market. The three burned through nearly $18 billion in cash reserves during the last quarter.

Chrysler said it needed $7 billion by year's end to keep operating. GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit to use if economic conditions deteriorate. Ford requested a $9 billion "standby line of credit" in case one of its Detroit competitors fails.

The bailout remains unpopular with the public. Sixty-one percent oppose providing the auto companies with billions in federal assistance, according to a CNN-Opinion Research Corp. poll released on Wednesday. Fifty-three percent said it would not help the country's economy.