Leaders of the automotive industry returned to Capitol Hill today to convince Congress that they need a massive loan to keep the industry on its feet.
At a Senate hearing Thursday, lawmakers quickly got down to business in discussing a $34 billion package with leaders of the auto industry. The auto industry submitted its proposal to lawmakers Wednesday, asking for even more money than it had last month.
"I think these plans still leave many questions unanswered," said committee chairman Christopher Dodd, D-Conn. "In particular, will taxpayer assistance truly ensure long-term viability for these companies, or will they be back here within weeks seeking more taxpayer assistance?"
"But let's be clear," Dodd added. "There is no doubt that the automobile companies have done far more, far more, I would suggest, than the financial companies to show that they deserve taxpayer support."
An auto bailout could take shape in several ways. Congress could decide to take action and pass a bailout bill before the end of the year. The Treasury Department could also supersede the legislative process and allocate the money through the emergency financial package signed into law this fall. Congress could also help craft a pre-arranged bankruptcy package that would reorganize the companies without taxpayer funding, although many wonder if such a package could be crafted in time before one of the companies would have to be liquidated.
Several lawmakers and auto representatives Thursday, however, insisted that bankruptcy must be kept off the table.
"Bankruptcy is not a viable option because it will seal the death of the auto companies," said New York senator Charles Schumer. "No one is going to buy a car from a bankrupt company. No one is one to make a loan to someone buying a car for a bankrupt company."
Other lawmakers were less convinced. Sen. Richard Shelby, the ranking Republican on the Banking Committee, said, "A lot of people believe that the restructuring plans are not a serious set of plans, that they contain few concrete details."
In their Senate testimony, the tone from Ford, Chrysler and GM CEOs was dire, as they warned that the failure of auto companies would have a disastrous ripple effect throughout the American economy.
With the dire warning came a humbler attitude from the CEOs.
"I want you to know I heard your message loud and clear," Ford CEO Alan Mulally told Senators of the frustration that met their testimony in November. He said Ford wants access to $9 billion in bridge financing and that while his company can make it through the current financial crisis, failure of the other two U.S. auto makers would put parts suppliers out of business. And when Ford could no longer buy parts from suppliers they share with other auto makers, they too would be in trouble.
"We are here because we made mistakes... but most of all because saving General Motors is a job worth doing," said GM CEO Rick Wagoner, who told lawmakers GM will go bankrupt and have to be liquidated without an infusion of $4 billion in taxpayer loans before the end of the year.
Chrysler CEO Bob Nardelli, who said the company is requesting a $7 billion loan, told the Senators that bankruptcy for the auto makers would be more expensive than the now-$34 billion in loans and lines of credit the car makers are seeking.
"I recognize that this is a significant amount of public money. However, we believe this is the least costly alternative considering the depth of the economic crisis and the options we face," he said.
But an economist, Mark Zandi of Moody's Economy.com, told the Senate Banking Committee that while bankruptcy will be more expensive than bailing out the car companies, he does not believe $34 billion will be the final price tag.
"$34 billion and a plan may not be enough for them to become viable again and Congress should prepare for this eventuality," Zandi said, predicting that by next fall auto makers will be back asking for more loans. Zandi predicted a final tab of between $75 billion and $125 billion.
Offering the perspective of car dealers, James Fleming, president of the Connecticut Automotive Retailers Association, said failures at the big three automakers would be devastating for small businesses because it's exceedingly difficult for a dealer to get people financed for cars when banks are hesitant to give them money.
"To our people, to these small business people, it is a tsunami, it is not a ripple," Fleming said.
"What you're voting for here, what you're supporting here is keeping people employed in those small businesses in your district," he said.
CEOs Road Trip To Washington
After an unsuccessful trip to Washington a few weeks ago to plead their case, the CEOs of Ford, General Motors and Chrysler hoped this time would be different. For starters they came to Washington in hybrid and prototype electric vehicles instead of private jets as a sign of a commitment to fuel-efficient cars and frugal travel.
Lawmakers from the Rust Belt and auto company leaders were outside the hearing building this morning to display some of the fuel-efficient technology they used for the road trip to Washington.
GM CEO Rick Wagoner, who arrived in a prototype for the forthcoming Chevy Volt, admitted that GM needs an infusion of cash before the end of the month to stay afloat.
"We're sorry to be asking for this support," Wagoner said. "We wish the market conditions were better. They're not. So this is what we need to do."
United Auto Workers president Ron Gettelfinger also arrived in town this morning from Detroit -- on a commercial flight.
"We are pleased to be here and to have the opportunity to testify again before Congress and we are going to make a pitch again for the emergency low-interest bridge loan to get the industry through a downturn that is not of their making," the union president told ABC News this morning at Reagan National Airport.
"We are going to talk about bankruptcy. We are going to present testimony that shows that it is a failed concept and will not work in this case."
Congressional Support for a Bailout?
While the automakers were, for the most part, well-received on Capitol Hill today, the hearing made clear that most legislative remedies would be complicated, long-term fixes. And it's not at all clear that Congress could pass a bailout, even if most members wanted to.
After the hearing, both Dodd and Michigan Sen. Carl Levin again implored the White House to use the funds in the Troubled Asset Relief Program to boost the auto industry. If the administration will not allocate TARP money, Levin said Congress would proceed with legislation next week, but said he wasn't sure whether lawmakers had enough votes to do so.
"We don't know," he said. "We just simply do not know. And we won't be able to know that for sure, I believe, until we're forced to walk down that road which is complicated and cumbersome."
Levin also said the sense of emergency in the room was palpable and added, "we cannot go home without attempting to get this done."
"It now goes to the actual stability of the financial sector itself," he said. "The banks and financial sector would be threatened if the Big Three go under."
Levin said using the Wall Street bailout money would be the "the clearest, cleanest, most certain path."
"The administration understands the importance of this problem and has the tools at its disposal."
Dodd said much the same thing after the hearing. "I don't think any of us want to play Russian roulette with that potential option. People are angry about bailouts. I suspect they would be a lot angrier about the failure of an automobile industry were literally thousands, hundreds of thousands of jobs could be lost."
"My preference would be that the Treasury and the Federal Reserve step up with the authority that we have given them," he said. "Their refusal to do anything about this at all is deeply disturbing. To put it mildly."
There were signs heading into Thursday that prospects for a bailout are grim, with both Senate Majority Leader Harry Reid, D-Nev., and Speaker of the House Nancy Pelosi, D-Calif., laying the groundwork for blaming the Bush administration if plans for the automakers collapse.
Reid said Wednesday there is not yet enough support among lawmakers to clinch the number of votes needed to tap into the TARP to pay for a bailout. At the same time, White House spokesman Tony Fratto said the administration remains "exceedingly reluctant" to tap into the $700 billion TARP funds to provide money for the auto bailout.
Jim Manley, Reid's spokesman, also said there really is no need for Congress to act.
"There is no reason to start at square one when [Treasury] Secretary [Henry] Paulson can protect millions of American jobs in one of our most important industries with the stroke of a pen today," Manley said.
"Sen. Reid remains committed to figuring out a way to help the auto companies avoid bankruptcy and prevent millions of Americans from losing their jobs. As we have said all along, the Treasury already has the authority and resources to protect thousands of Americans who work in our nation's struggling auto industry. If the administration continues to oppose using TARP funds to address this crisis, we will continue trying to find an alternate solution," he said.
Indeed, the leading bailout proposal in the Senate would not use TARP funds to bolster the industry. Instead, it would use $25 billion in loans Congress has already approved for the development of fuel-efficient vehicles.
Although there may be enough votes in the Senate to use that money, it could still run into trouble if, and when, the measure is subsequently considered by the House. Pelosi has said she is opposed to using that money for anything but fuel-efficient, environmentally friendly technology.
A recent CNN poll found about 60 percent of Americans oppose a bailout for the automakers.
ABC News' Vija Udenans and Charles Herman contributed to this report.