4 Min Read
WASHINGTON (Reuters) - The chief executives of the major U.S. auto companies prepared on Wednesday for make-or-break congressional hearings on their request for $34 billion in government bailout loans, while lawmakers considered options including one or more of the Detroit Three going bankrupt.
Congressional staff were briefed by General Motors Corp, Ford Motor Co and Chrysler LLC on the companies' restructuring proposals and the types of loans they want. The proposals, submitted on Tuesday by the automakers, had been demanded by congressional Democrats as a stipulation for consideration of the loans.
House and Senate aides said there was no clear legislative path to how any financial aid could be arranged for the automakers.
"All options are on the table," Sen. Robert Menendez told CNBC television one day before he and other members of the Banking Committee are due to question Ford's CEO Alan Mulally, GM's CEO Rick Wagoner and Chrysler's CEO Bob Nardelli at a hearing.
The CEOs drove to Washington from Detroit after being criticized for flying in corporate jets to Washington last month to ask for billions of dollars in government loans.
GM, Ford and Chrysler each submitted separate plans that require individual responses.
Ford wants a $9 billion line of credit that would only be tapped if the recession worsened and auto sales declined further.
GM and Chrysler said they face possible failure if they do not receive government loans. GM wants $4 billion and Chrysler $7 billion by year's end. GM is also wants another $8 billion in early 2009 and a $6 billion line of credit if its cash position deteriorates further.
Congressional aides said there was little appetite to address a sweeping industry restructuring when legislation is considered next week.
A proposal needs 60 votes in the Senate to overcome procedural hurdles and receive support from the White House.
In November, divisions mainly along party lines in that chamber scuttled proposals to help the industry.
The Senate plans to take up the matter next week, and the House hopes to do the same.
The Bush administration has been against a "blank check" for Detroit and insists the companies prove they can compete as a condition for assistance.
The administration did not rule out meeting a $34 billion figure. White House spokeswoman Dana Perino said it was too early to judge the latest request.
"We need to look at each of them and see if -- what we would be able to support could actually be a good investment for the taxpayers, and we just don't know that yet," Perino said.
The picture, she said, would become clearer after the Senate hearing on Thursday and a follow-on hearing in the House Financial Services Committee on Friday.
One issue expected to come up is the option of pre-packaged bankruptcies. Under that scenario, agreements to cut labor and other costs and renegotiate supplier and lender terms are arranged ahead of a Chapter 11 filing. Court restructuring would be faster than normal.
Democratic leaders, the companies and the United Auto Workers (UAW) have sought to dampen any discussion of Congress possibly facilitating a court restructuring. They say bankruptcy would kill the industry.
But Menendez did not dismiss the possibility.
"Even if we give financing under a prepackaged bankruptcy, that may potentially be more costly. I'm not convinced of that and so I continue to look at that as a potential option," Menendez said.
House Speaker Nancy Pelosi said on Tuesday that bankruptcy was out of the question.
One Senate aide said members would explore whether the companies would be willing to make changes beyond what they have proposed in their restructuring plans.
UAW President Ron Gettelfinger said on Wednesday the union would surrender job security protections and delay payments to a retiree health-care trust to help clinch government help. He said the UAW would consider other changes to contracts.
Reporting by John Crawley and John Poirier; Additional reporting by Kevin Drawbaugh in Washington and David Bailey in Detroit; Editing by Maureen Bavdek, Toni Reinhold