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.