In a final attempt to keep at least one of the Detroit Three from being forced to file for bankruptcy, the chief executives of General Motors, Chrysler and Ford appeared before the Senate Banking Committee Thursday to ask for a combined $34 billion in loans.
“I recognize that this is a significant amount of public money,” Chrysler CEO Bob Nardelli said in the automakers’ second round of congressional hearings in the last two weeks. “However, we believe this is the least costly alternative considering the depth of the economic crisis and the options that we face.”
Chrysler is asking Congress for a $7 billion loan, and For is asking for a $9 billion line of credit, though CEO Alan Mulally said the company probably won’t need to use the money.
But GM — whose vehicle sales plummeted 41 percent last month — asked for $18 billion total, including $4 billion by the end of the month and another $4 billion in January.
During his testimony, United Auto Workers President Ron Gettelfinger stressed GM’s need for immediate financial aid.
“I believe we could lose GM by the end of this month unless something happens,” Gettelfinger said.
In an effort to rally support for the bailout plan, UAW officials announced earlier this week that the union will suspend the “jobs bank,” which gives wages to workers who were laid off.
Roland Zullo, an assistant research scientist at the University’s Institute for Research on Labor, Employment, and the Economy, said suspending the jobs bank wasn’t a particularly drastic move, but would reflect well on the industry.
“At this point, what the UAW is doing is strategically giving up some concessions,” Zullo said. “Giving up the jobs bank is important politically. They’re trying to show to Congress that they’re willing to give up some benefits.”
Zullo said Michigan auto workers nearing retirement would be the most affected if the companies were to go bankrupt, because their pension plans could be renegotiated or disappear altogether.
During the hearing, some senators expressed concerns with approving federal assistance to the automakers, arguing that they lacked a solid restructuring plan.
After being lambasted two weeks ago for arriving in Washington by private jet, all three CEOs showcased their commitment to eliminating unnecessary expenses by driving to the hearing.
But Sen. Richard Shelby (R–Ala.), a staunch opponent of the auto industry bailout, questioned the sincerity of the road trips.
“I wonder if they’re going to drive back,” he said.
The Detroit Three executives have been widely criticized for mismanaging their respective companies, and many in Washington are calling for the companies’ bankruptcy.
University Law Prof. John Pottow, a bankruptcy and commercial law expert, said that because of the economic turmoil, allowing GM, Chrysler and Ford to hit bankruptcy would have especially negative effects.
“The only thing that worries me about saying ‘just let the Chapter 11 process work’ is that we’re in the middle of a giant depression and a credit dislocation phase,” Pottow said. “Banks are running out of funds. Companies who would have gone into bankruptcy are simply liquidating.”
But bailout or no bailout, Pottow said tough times for the auto industry spell problems for Michigan in the months and years ahead.
“Michigan is going to lose jobs as more facilities close,” he said. “That’s going to happen in bankruptcy or outside bankruptcy, and that’s going to happen even if the federal government writes them a check. These companies are simply not profitable on their current models.”
Pottow said he’s worried that government influence might mean that tough decisions — like closing factories — won’t get made. He suggested that Congress provide a modest amount of loans and step aside to act as a sort of “silent partner” in the restructuring process.
Congress will hear more arguments from the Detroit Three and the UAW today and could hold an emergency session next week to vote on legislation.
— The Associated Press contributed to this report