Carmakers’ bailout pleas hit Senate skepticism

WASHINGTON — Desperate U.S. automakers ran into fresh obstacles from skeptical lawmakers Thursday as they appealed with rising urgency — and a new dose of humility — for a US$34 billion bailout. Without help, said one senator, “we’re looking at a death sentence.”

With lawmakers in both parties pressing the automakers to consider a pre-negotiated bankruptcy — something they have consistently shunned — the Big Three were contemplating a government-run restructuring that could yield results similar to bankruptcy, including massive downsizing, in return for the bailout billions. But there was no assurance they could get even that.

And that wasn’t all the unwelcome news. Congressional officials said during the day that one leading proposal — to tap an already-approved fund supposedly set aside for making cars environmentally efficient — wouldn’t give the carmakers nearly as much money as they say they need.

The auto executives pleaded with lawmakers at a contentious Capitol Hill hearing — their second round in as many weeks — for emergency aid before year’s end. But with time running out on the current Congress, skepticism about the bailout appeared to be as strong as ever.

“In all due respect, folks, I don’t think there’s faith that the next ... three months will work out given the past history,” said Sen. Charles E. Schumer, D-N.Y.

“No thinking person thinks that all three companies can survive,” said Republican Sen. Bob Corker of Tennessee.

Chris Dodd, chairman of the Banking Committee, was the senator who spoke of a death sentence — though he also said, “We’re not going to leave town without trying” to help.

The auto executives are to make their case at a House hearing on Friday, and Congress could take up rescue legislation next week in an emergency session.

No one was talking optimistically about their chances, and the skepticism wasn’t limited to Capitol Hill.

President George W. Bush said in an interview with NBC News, “No matter how important the autos are to our economy we don’t want to put good money after bad. In other words, we want to make sure that the plan they develop is one that ensures their long-term viability for the sake of the taxpayer.”

President-elect Barack Obama was keeping his distance, and Rep. Barney Frank, D-Mass., who has been dealing with both the financial bailout and the auto rescue proposal, said, “He’s going to have to be more assertive than he’s been.” Frank is chairman of the House Financial Services Committee, which will conduct Friday’s hearing.

Repentant after a botched first crack at bailout pleas, the executives from General Motors Corp., Ford Motor Co. and Chrysler LLC all agreed during Thursday’s session that a multibillion-dollar bailout deal would include a supervisory government board that could order major overhauls of the companies if deemed necessary for survival.

United Auto Workers union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators 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 without 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.

The Big Three CEOs told the senators they hoped to make amends for past blunders. “We made mistakes, which we’re learning from,” GM chief Rick Wagoner said. Ford CEO Alan Mulally also acknowledged big mistakes, saying his company’s approach once was “If 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 has no intention of doing so, and 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.

But congressional budget analysts have privately told top Democrats that would yield only $10 billion to $15 billion in short-term loans. Congressional officials described that finding only on condition of anonymity because they were not authorized to disclose the analysis.

The auto executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a first 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 this time and would devote itself to manufacturing “fuel-efficient cars and trucks that people want to buy.”

Asked whether the carmakers would agree to a setup like the one established for the U.S. bailout of Chrysler Corp. in 1979, with a federal restructuring trustee who had some of the same powers as a bankruptcy court, all three executives indicated they would. Ford’s Mulally added, “I probably need to think about that a little bit. It sounds right, but I just don’t know all of the implications.”

Sen. Richard Shelby of Alabama, the senior Republican on the panel, complained that the price tag on the package had jumped since the trio last appeared just two weeks ago. He pressed the automakers to explain why, and to justify how such aid would not simply “prop up a failed business model for a few months ... and how are you going to pay it back to the taxpayers?”

Democrats, too, questioned whether an auto bailout would amount to investing taxpayer money in a failing enterprise.

“Be honest and tell me ... just tell me if things stay the way they are now, are you going to be back in a year” asking for more money? asked Sen. Jon Tester, D-Mont.

Protesters who briefly interrupted the hearing were a reminder of what polls show is thin public support for a rescue. “The bailout is a sellout!” demonstrators chanted as they were escorted from the hearing room by police.

Dodd said he wants to help the industry, but he also said that detailed plans submitted earlier this week on how the companies would use the money to right themselves still left a lot of questions unanswered. Doing nothing, though, “plays Russian roulette with the entire economy of the United States,” Dodd said. “Inaction is no solution.”

Gene L. Dodaro, the top official at Congress’ watchdog agency — the Government Accountability Office — agreed with Dodd that the financial industry rescue fund set up in October “is worded broadly enough” to permit it to be tapped for the automakers.

Dodaro testified that the Federal Reserve also has the authority under existing law to make loans to the domestic auto industry if it so chooses.

Dodd said that both Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke had been invited to testify at Thursday’s hearing but had declined. He later criticized the Treasury chief for travelling to China at a time of economic peril in the U.S.

“Time to come home — we have a serious problem here,” Dodd said. “I need the Federal Reserve to step up as well.”

Though the current total request is $34 billion, Ford’s proposal says it might have to come back with a second request for another $4 billion if the recession persists into 2010, raising the total even higher.