DETROIT (Reuters) - U.S. auto industry bankruptcies would have a devastating impact on the domestic economy, many times larger than the aid automakers seek, General Motors Corp (GM.N) Chief Executive Rick Wagoner said on Sunday.
“This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating,” Wagoner said in an appearance on a NBC-affiliated television station in Detroit.
Wagoner, the chief executives of Ford Motor Co (F.N) and Chrysler CBS.UL, and United Auto Workers union President Ron Gettelfinger are expected to testify to U.S. congressional committees this week in support of aid to the auto industry.
Democrats have moved to direct $25 billion of loans to the Detroit-based automakers, who have argued that they need the liquidity to survive the industry downturn in which U.S. auto sales have plunged to the lowest levels in a quarter century.
However, an auto industry bailout has hit stiff opposition from Republican senators and representatives who question whether the automakers would be viable even with the support.
The White House also has warned pushing a bailout using the $700 billion financial rescue fund already approved could lead to partisan gridlock and has suggested loosening restrictions on $25 billion of low-interest loans already approved for investments in fuel efficiency improvements.
Wagoner said GM’s financial needs stem directly from the Wall Street financial crisis, and the aid automakers seek should not be looked at in terms of “federalizing a business.”
“The financial system is failing to supply the credit that is necessary for small businesses, big businesses, any businesses to operate on a daily basis,” Wagoner said.
The path out of bankruptcy would not be simple, he said.
“This idea that you just go into Chapter 11 and hang around for three months and agree to reduce your debt obligations and don’t pay your retirees, this is a fantasy,” Wagoner said. “Most people will stop buying the cars of a bankrupt company.”
Reporting by David Bailey; Editing by Tim Dobbyn