Stark Auto Warning: There's No 'Plan B'
GM, Ford and Chrysler unveil rescue plans.
Dec. 2, 2008— -- A humbler group of auto executives returns to Congress this week, pledging to slash costs, including their own salaries, and to accelerate the design and construction of fuel-efficient cars if Congress coughs up tens of billions to bail them out.
The CEOs of Detroit, who enraged Congress last month by showing up in private jets and holding tin cups, this time came with detailed plans they claim will save their foundering businesses. Added together, the separate proposals include $18 billion in loans and credit sought by GM, $7 billion sought by Chrysler and $9 billion sought by Ford - $9 billion more than the automakers sought earlier in November.
Along with their plans for recovery, the automakers offered a stark warning that the taxpayer money is essential to Detroit.
"There isn't a Plan B," said Chief Operating Officer Fritz Henderson today, arguing that taxpayer aid is essential to GM's future. "Absent support, frankly, the company just can't fund its operations." In its submission to Congress, GM warned "the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy."
House Speaker Nancy Pelosi, D-Calif, said late this afternoon that she believed the automakers would receive government help. Senate Majority Leader Harry Reid, who before Thanksgiving would not guarantee that the auto bailout would get a vote, today said he will put a legislative vehicle for the bailout on the Senate floor on Monday.
"I believe that an intervention will happen either legislatively or from the administration. I think it's pretty clear that bankruptcy is not an option," Pelosi said at a press conference on Capitol Hill. Pelosi said she hoped that Congress would take action on the automakers' plan, but she also emphasized that under the government's $700 billion financial rescue plan, the Bush administration could also act on its own. The administration, she said, has "full authority" to grant loans under the Troubled Asset Relief Program.
Any plan that passes Congress will have to be strong enough to convince lawmakers that it can succeed -- a tall order.
"We are looking to make sure that we're doing everything we can to take care of the auto industry, if in fact it's viable that it is it's not just throw them a rope that doesn't get them to shore," said Reid after a round table discussion on renewable energy in Washington.
The automakers' plans will be reviewed during Congressional hearings on Thursday and Friday and their performance and the taste it leaves could determine if lawmakers can pass legislation when they return to Capitol Hill next week. It remains to be seen what exactly will be in the bill and, asked on a conference call today, Sen. Carl Levin, D-Mich, who has spearheaded the bailout effort for Democrats, admitted that it was unclear if there were enough votes for a bailout to pass Congress.
"We'll have to wait and see," he said.
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