Manufacturers make case for $25 billion in U.S. aid

WASHINGTON — WASHINGTON - Detroit's Big Three automakers pleaded with Congress yesterday for a $25 billion lifeline to save the once-proud titans of U.S. industry, warning of a national economic catastrophe should they collapse.

Millions of layoffs would follow their demise, they said, as damaging effects ripple across an already-faltering economy.


The frantic bid from Detroit for help was laid bare at a packed hearing of the Senate banking committee, in which two of the three automakers said they might run out of money by the end of the year.

But the new rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who do not want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.


"Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors Corp. CEO Rick Wagoner told the Senate banking committee. He blamed the industry's predicament not on failures by management but on the deepening global financial crisis.

And Robert Nardelli, the CEO of Chrysler, told the panel the bailout would be "the least costly alternative" when compared with damage from bankruptcy.

Under questioning from senators, both said they would be willing to consider slashing their salaries to $1 to show a willingness to sacrifice for federal help.

Sympathy for the industry was sparse.

Banking committee Chairman Christopher J. Dodd, a Connecticut Democrat, told the leaders of GM, Chrysler and Ford Motor Co. that the industry was "seeking treatments for wounds that I believe to a large extent were self-inflicted."

Still, he said, "At a time like this, when our economic future is so tenuous, we must do all we can to ensure stability."

Sen. Michael B. Enzi, a Wyoming Republican, complained that the larger financial crisis "is not the only reason why the domestic auto industry is in trouble."

He noted "inefficient production" and "costly labor agreements" that put U.S. automakers at a disadvantage to foreign companies.


Ford CEO Alan Mulally told senators that the auto industry is "a pillar of our economy."GM's Wagoner said that despite some public perceptions that his company is not keeping pace with the times and technological changes, "we've moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around.

"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."

Failure of the auto industry "would be catastrophic," he said, resulting in 3 million jobs lost within the first year and "economic devastation [that] would far exceed the government support that our industry needs to weather the current crisis."

Treasury Secretary Henry M. Paulson Jr., at a House hearing yesterday morning and again at a lunch with Republican senators, implored lawmakers to oppose using any of the $700 billion financial bailout for the auto companies, which he said would set a dangerous precedent.

The White House instead has pushed for the auto companies to get immediate access to $25 billion in previously approved loans to retool production plants to make fuel-efficient vehicles.

Sen. Carl Levin, a Michigan Democrat and one of the auto industry's chief allies on Capitol Hill, said he remained hopeful that a deal could be worked out. He added that a consensus had emerged among leaders of both parties and at the White House on providing $25 billion in so-called bridge loans.


But even Levin conceded that hammering out details was proving difficult. "Progress? No," Levin said bluntly when asked where things stood yesterday.

Chrysler's Nardelli sought to respond to critics who suggest that the automakers seek Chapter 11 bankruptcy protection, as have some airlines that later emerged restructured and leaner.

"We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said.

Chrysler was bailed out by the federal government once before, in 1979, with $1.2 billion in loan guarantees. The company repaid the loan, plus interest, ahead of schedule.

Joining the Big Three CEOs, Ron Gettelfinger, president of the United Auto Workers union, said the emergency loans are important for the survival of the industry and union jobs. The overall United States vehicle market has fallen 14.8 percent through the first 10 months of the year. However, sales in October plummeted 31.9 percent, mostly because of the lack of available credit for potential car buyers.

"There is no great mystery as to why this enormous decline in sales has occurred," Gettelfinger said. "Because of the overall credit crunch, most families cannot get credit on reasonable terms to finance the purchase of a vehicle."


With sales and revenues dropping sharply, GM, Ford and Chrysler have been digging deep into their cash reserves to continue paying their employees and suppliers.

Congressional leaders worked behind the scenes in an effort to hammer out a compromise that could speed some aid to the automakers before year's end. But the outlook seemed poor.

"My sense is that nothing's going to happen this week," Sen. Bob Corker, a Tennessee Republican, said at the opening of the hearing.

In the Senate, Democrats discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September - designed to help the companies develop more fuel- efficient vehicles - to tide them over until President-elect Barack Obama takes office.

House Speaker Nancy Pelosi of California and other senior Democrats who count environmental groups among their strongest supporters have vehemently opposed that approach because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.

Instead, they want to draw the $25 billion directly from the $700 billion Wall Street bailout - bringing the total aid to the car companies to $50 billion.


A Senate vote on that plan, which would also extend jobless benefits, could come as early as tomorrow, but aides in both parties and lobbyists tracking the effort privately acknowledge that it does not have the support to advance.

The New York Times and the Associated Press contributed to this article.