WASHINGTON (Reuters) - U.S. auto executives went to Capitol Hill for a second day on Wednesday to argue their case for $25 billion in aid as legislators proposed changes to help a bailout pass Congressional and White House muster.
The day’s hearings, before the House Financial Services Committee, got off to a rousing start when panel Chairman Barney Frank asked how the government could justify a bailout for banks and insurers, but not the automakers.
“Frankly, there seems to me to be an inherent cultural bias,” Frank said. “Aid to blue-collar employees is being judged by a standard different than white-collar employees.”
The weakened economy and global credit crisis pushed the U.S. government into bailing out companies including insurer American International Group Inc, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.
Despite pressure from many sides, the prospects of an automaker bailout getting done this week remain uncertain.
Congressional Democrats have proposed using money from the $700 billion bailout package for banks to aid the automakers, but the Bush administration has expressed opposition. In addition, other opponents of the bailout have argued that reorganization under bankruptcy would be the best solution to the carmakers’ problems.
But legislators have started to talk about crafting some kind of deal.
Senate Republican leader Mitch McConnell said a compromise is the only way for legislation to become law. He proposed to tap $25 billion of auto retooling loans already approved by Congress but not yet disbursed by the Energy Department — an approach supported by the White House.
White House spokeswoman Dana Perino said the administration remains opposed to giving automakers money from the $700 billion financial rescue package, as some Democrats have urged. “There’s no appetite for that,” she said.
Democratic Sen. Carl Levin of Michigan, meanwhile, urged the House committee not to let differing views about the source of U.S. automaker loans hold up the aid.
“Are we going to permit a difference over the source of these loans to destroy an opportunity to help an industry so essential to this country?” Levin asked.
Republican Ohio Sen. George Voinovich, whose state could be devastated by a collapse of the U.S. auto industry, said he hopes Congress can reach a deal by the end of Wednesday.
“We are having a lot of discussions with the Democrats,” said Voinovich, noting a growing consensus “of getting something done so we don’t lose General Motors.”
Senate Majority Leader Harry Reid, a Democrat, also hopes the Senate can pass a bill this week.
However, “no one should be overly concerned if we are unable,” Reid said.
But investors did seem concerned, as General Motors and Ford shares fell on the uncertainty of the bill’s passage. GM closed down nearly 10 percent at $2.79 after hitting a 66-year low of $2.52, and Ford was off 25 percent at $1.26, after hitting a 26-year low of $1.21.
Connecticut Democrat Christopher Dodd, chairman of the Senate Banking Committee, said it looked unlikely that Congress will come to agreement this week on an assistance package for the auto industry.
“I’m anxious to see something happen,” he told reporters after a committee hearing on a separate issue. “But frankly, the idea that there’s going to be a bill, I think, is remote.”
Barclays Capital analyst Brian Johnson said that a viable bill likely would emerge only if elements of restructuring requirements in the proposal before the House were incorporated into the Senate draft.
“Assuming defeat, GM would have to ‘run on fumes’ until the next Congress and administration, unless Congress were to reconvene in December to address emergency compromise legislation,” Johnson said in a note to clients.
While talk of dealmaking dominated the hallways of Congress, the auto executives at Wednesday’s hearings continued to face withering criticism.
One point that several members of Congress hit on was the way the CEOs got to Washington.
Rep. Gary Ackerman, Democrat from New York, noted the irony of the CEOs flying on private jets and “getting off with tin cups in their hands.”
“Couldn’t you have downgraded to first class or something, or jet-pooled ... to get here?” he asked.
The executives on Wednesday’s panel — GM CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli — said they flew on private jets. A spokesman said that the head of the United Auto Workers, Ron Gettelfinger, flew commercial.
Rep. Jeb Hensarling, a Texas Republican, also expressed skepticism about helping the industry.
“How do I know that you will not become the next AIG? Twenty-five billion now, $25 billion next month, $25 billion the month after that,” Hensarling said.
“What I have not heard is a plan that convinces me that with the $25 billion, that you will achieve sustainability,” said Hensarling.
Rep. Judy Biggert, an Illinois Republican, also voiced frustration that Detroit was asking for help while stubbornly making the kinds of cars people didn’t want to buy.
“Americans don’t want to buy the expensive cars, pay for the high fuel costs and be dependent on foreign oil,” Biggert said. “Why should we be bailing you out now, when ... you’ve really been dragging your feet ... on the kind of cars that ... aren’t being made?”
The problems in the autos industry are not limited to the United States.
Reeling from a relentless sales slide, Toyota Motor Corp said it would shut down all of its North American factories for two days next month, while rival Nissan Motor Co Ltd remained pessimistic over the industry’s near-term prospects.
Toyota, the world’s biggest automaker, had already canceled all U.S. production of slow-selling light trucks for three months this summer. A spokeswoman said production would be reduced further in 2009 at three U.S. assembly plants.
Carlos Ghosn, chief executive of Nissan and Renault SA, speaking separately in Washington, chimed in with his own bleak view of the sector’s short-term prospects with a reminder that Nissan was expecting virtually no profit in the October-March second half.
Automakers across Europe were looking to get their share of government handouts, as industry leaders in Britain, Germany and Italy all made cases for their piece of the pie.
European carmakers need financial aid, senior EU officials also said, singling out GM unit Opel as a possible emergency case.
European auto companies have asked for 40 billion euros ($50.5 billion) of soft loans for the industry. Opel is negotiating aid with the German government.
Also on Wednesday, German solar energy company SolarWorld said it was prepared to acquire cash-strapped carmaker Opel’s plants in Germany, but analysts dismissed the plan as unrealistic, and GM said Opel was not for sale.
Britain’s car manufacturers are also demanding access to government funds put aside to bail out the banking sector.
In Italy, Fiat SpA CEO Sergio Marchionne said that any government aid for Europe’s ailing car industry should be broad-based.
“Either (aid) is for everyone or for no one,” Marchionne said on the sidelines of a conference between Italian and Brazilian business leaders.
Additional reporting by Reuters bureaus worldwide; writing by Patrick Fitzgibbons; Editing by Steve Orlofsky, Gerald E. McCormick, Gary Hill