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Some senators voice skepticism on aid plan
By Ken Thomas
Associated Press
Published on Friday, Dec 05, 2008
WASHINGTON: U.S. automakers drew fresh skepticism from lawmakers Thursday in a rocky confrontation over their pleas for an expanded $34 billion rescue package they say they need to survive.
Congressional analysts said one bailout plan under consideration would fall short of what the companies want.
With time on the current Congress running out, opposition to the bailout appeared to be as strong as last week — before Detroit's Big Three auto chiefs returned to Capitol Hill with more detailed plans on how they would spend the money.
Several lawmakers in both parties are pressing the automakers to consider a so-called ''pre-packaged'' bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Detroit Three have publicly shunned the notion, saying it would kill sales by destroying customers' confidence — but executives have indicated in recent days that it might ultimately be necessary.
The executives all agreed in Thursday's hearing that a multibillion-dollar bailout deal would include a supervisory government board that could order major restructuring of the companies if deemed necessary for survival — similar to the results in many reorganizing efforts under bankruptcy law.
United Auto Worker union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators at a Banking Committee hearing that any kind of bankruptcy, even a pre-packaged one, was not ''a viable option.'' Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.
He also warned that in the absence of action by Congress: ''I believe we could lose General Motors by the
end of this month.'' He said the situation was dire and time was of the essence.
Meanwhile, Rep. Barney Frank, D-Mass., who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said President-elect Barack Obama needs to play a more significant role on economic issues.
At the Capitol, the Detroit Three CEOs told the senators they hoped to make amends for past blunders. ''We made mistakes, which we're learning from,'' General Motors chief executive Rick Wagoner said. Ford CEO Alan Mulally also acknowledged big mistakes, saying his company's approach once was ''You build it, they will come.''
''We produced more vehicles than our customers wanted, then slashed prices,'' he said.
But as a result of these past mistakes, ''we are really focused,'' he said.
Congressional Democrats have urged the administration to tap into an already enacted $700 billion financial bailout program to help the auto industry. The Bush administration has said that it would prefer aid be taken from an earlier $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.
The executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a botched appeal for $25 billion in which they were chided for flying on private jets to beg for money.
Chrysler CEO Bob Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would repay taxpayers by 2012 and would devote itself to manufacturing ''fuel-efficient cars and trucks that people want to buy.''
Gene L. Dodaro, the top official at Congress' watchdog agency — the Government Accountability Office — said the $700 billion package set up in October ''is worded broadly enough'' to permit it to be tapped for the automakers.
WASHINGTON: U.S. automakers drew fresh skepticism from lawmakers Thursday in a rocky confrontation over their pleas for an expanded $34 billion rescue package they say they need to survive.
Congressional analysts said one bailout plan under consideration would fall short of what the companies want.
With time on the current Congress running out, opposition to the bailout appeared to be as strong as last week — before Detroit's Big Three auto chiefs returned to Capitol Hill with more detailed plans on how they would spend the money.
Several lawmakers in both parties are pressing the automakers to consider a so-called ''pre-packaged'' bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Detroit Three have publicly shunned the notion, saying it would kill sales by destroying customers' confidence — but executives have indicated in recent days that it might ultimately be necessary.
The executives all agreed in Thursday's hearing that a multibillion-dollar bailout deal would include a supervisory government board that could order major restructuring of the companies if deemed necessary for survival — similar to the results in many reorganizing efforts under bankruptcy law.
United Auto Worker union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators at a Banking Committee hearing that any kind of bankruptcy, even a pre-packaged one, was not ''a viable option.'' Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.
He also warned that in the absence of action by Congress: ''I believe we could lose General Motors by the
end of this month.'' He said the situation was dire and time was of the essence.
Meanwhile, Rep. Barney Frank, D-Mass., who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said President-elect Barack Obama needs to play a more significant role on economic issues.
At the Capitol, the Detroit Three CEOs told the senators they hoped to make amends for past blunders. ''We made mistakes, which we're learning from,'' General Motors chief executive Rick Wagoner said. Ford CEO Alan Mulally also acknowledged big mistakes, saying his company's approach once was ''You build it, they will come.''
''We produced more vehicles than our customers wanted, then slashed prices,'' he said.
But as a result of these past mistakes, ''we are really focused,'' he said.
Congressional Democrats have urged the administration to tap into an already enacted $700 billion financial bailout program to help the auto industry. The Bush administration has said that it would prefer aid be taken from an earlier $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.
The executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a botched appeal for $25 billion in which they were chided for flying on private jets to beg for money.
Chrysler CEO Bob Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would repay taxpayers by 2012 and would devote itself to manufacturing ''fuel-efficient cars and trucks that people want to buy.''
Gene L. Dodaro, the top official at Congress' watchdog agency — the Government Accountability Office — said the $700 billion package set up in October ''is worded broadly enough'' to permit it to be tapped for the automakers.
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