Senators grill auto CEOs, eye GM-Chrysler deal
WASHINGTON (Reuters) - The CEOs of General Motors Corp and Chrysler LLC said they would consider restarting talks about a merger during a nearly six-hour congressional grilling on the industry's pleas for $34 billion in government aid.
The CEOs of GM, Chrysler and Ford Motor Co all promised to refocus their businesses on higher fuel efficiency vehicles and lower production costs as conditions of any federal bailout, and the heads of GM and Chrysler said they would consider a merger if that was also a condition.
"I would be very willing to look at it seriously," GM CEO Rick Wagoner told the Senate Banking Committee, adding that merger talks earlier this year were dropped on concerns GM did not have the financing to merge with Chrysler.
Chrysler CEO Robert Nardelli said his job would likely be the first to go in a merger with GM, but if that would save Chrysler and its workers "I would do it."
The merger idea was pressed by Utah Republican Sen. Robert Bennett and Tennessee Republican Sen. Bob Corker.
"I'd like to see that happen," Corker said. "I hope that's an outcome... our country cannot really deal with three separate automakers."
But United Auto Workers President Ron Gettelfinger questioned claims of cost savings from a merger and told the committee such a deal would bring "unbelievable" job losses.
Shares in both GM and Ford closed lower in a day of broadly bearish trading as Detroit's once mighty Big Three again came hat in hand to Washington with no clear prospect of getting the money they seek. The same CEOs failed to secure federal help two weeks ago in an earlier round of congressional hearings.
They warned again that a steep slump in car sales and sluggish world credit markets are threatening their futures and millions of good-paying jobs.
This time the executives did not fly in on the corporate jets that drew sharp criticism on their last visit.
GM's Wagoner arrived at the Capitol building in a light blue Chevrolet Volt electric prototype, but drove most of the way from Detroit in a Chevrolet Malibu Hybrid. Ford CEO Alan Mulally came in a white Ford Escape Hybrid, and Chrysler's Nardelli arrived in a white EV electric vehicle.
With the government showering a $700 billion bailout fund on distressed banks and Wall Street, there is wide agreement among lawmakers and the Bush administration that the automakers need help too, but deep division about how to go about it.
MORE DEBATE AHEAD
No resolution of the auto aid issue is expected until next week at the earliest, when the full Congress reconvenes.
"We need to sit down over the next 24 to 48 hours and see what we can do to pull something together," said Banking Committee Chairman Christopher Dodd, a Connecticut Democrat.
The CEOs will appear before the House of Representatives Financial Services Committee on Friday.
Lawmakers are suspicious of Detroit's promises to reform, given its past failures to ween itself from gasoline guzzlers and make cars that consumers want to buy.
"I don't trust the car companies' leadership," said New York Democratic Sen. Charles Schumer at the Senate hearing.
But in a comment reflecting many lawmakers' sentiments, he added, "We can't let the industry fail."
GM wants $4 billion and Chrysler $7 billion by year's end. GM also wants another $8 billion in early 2009 and a $6 billion line of credit if its cash position erodes further. Ford says it has enough funds now but wants a $9 billion line of credit.
An economist told the committee that the estimated $34 billion overall cost of the bailout cost could rise. Two weeks ago, the automakers had estimated they needed $25 billion.
The industry may need $75 billion to $125 billion to avoid bankruptcy and the companies may well return asking for more money later if they get the $34 billion they want now, said Mark Zandi, chief economist of Moody's Economy.com.
"I'm skeptical, doubtful that it's going to end at $34 billion," Zandi said.
On a combined basis, sales by the three automakers plunged 40 percent in November. The economy, already a year into recession, would suffer "severe and sweeping" damage if one or more of the automakers failed, Dodd said.
But Alabama Sen. Richard Shelby, the top Republican on the committee, voiced doubts shared by some senators on whether taxpayer funds are well-spent helping struggling businesses.
Shelby opposed the $700-billion bailout of Wall Street and the banks and "applying the same standard, I intend to oppose bailing out the Big Three auto manufacturers," he said.
WHITE HOUSE RESERVING JUDGMENT
The three companies submitted plans to Congress Tuesday intended to show that they can still be viable businesses. Congress last month demanded the plans.
The White House said on Thursday it was too early to judge the viability plans and that the administration wanted to hear the testimony to Congress first.
The Bush administration, along with some auto state senators from both parties, has favored helping the industry by redirecting $25 billion in funds from an existing Energy Department fuel-efficiency retooling loan program.
But many Democrats oppose this and want part of the administration's $700-billion bank bailout, known as the Troubled Asset Relief Program, dedicated to automakers. This approach has been opposed by the administration, however.
The three CEOs said they would accept some sort of oversight board as a condition of a bailout.
They also vowed to reshape their business models. For instance, GM -- the world's largest automaker -- plans to sell its Saab unit and drop its Pontiac and Saturn labels.
GM has repeatedly dismissed filing for bankruptcy as an option, saying it would damage consumer confidence in its products. Wagoner told reporters before the hearing that bankruptcy is "not our plan" and said it would be a shame for the United States to drop out of the auto technology race.
Ford and Chrysler also object to bankruptcy to save their industry. But some lawmakers are exploring the possibility of conditioning federal aid on an speedy court restructuring of one or more of the Detroit manufacturers.
The head of the Government Accountability Office (GAO), the investigative arm of Congress, said Congress could consider a two-step approach with an immediate cash infusion to avert any collapse, followed by a program for distributing more loans over time based on certain criteria being met.
Gene Dodaro, acting GAO comptroller general, said an oversight board could administer the financing. He added that the Bush administration has legal authority to use money from its bank rescue program to help Detroit. Moreover, Dodaro said, the Federal Reserve could step in under certain circumstances.
Shares of GM closed regular trading Thursday down 16.1 percent at $4.11, while Ford ended 6.7 percent lower at $2.66, both on the New York Stock Exchange.