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Monday, Jul 6, 2009
On bended knee, and with promises to retool their operations, the Big Three ask Congress for billions to save the auto industry. They might get it this time.
By Mike Madden
Read more: Politics, Labor, News, Ford, Economy, General Motors, Cars, Michigan, Chrysler, Mike Madden
Reuters/Joshua Roberts
From left, Richard Wagoner of General Motors, Ron Gettelfinger of the United Auto Workers International Union, Alan Mulally of Ford Motor Co., and Robert Nardelli of Chrysler LLC listen to testimony during the Senate Banking Committee hearing in Washington Dec. 4, 2008.
Dec. 5, 2008 | WASHINGTON -- For the most part, the drive from Detroit to Washington is pretty boring (though there used to be a pinball machine at one rest stop on the Ohio Turnpike that gave unlimited multiballs in every game, which could keep even the weariest travelers busy long enough that they wanted to get back in the car). But apparently nine hours in a Chevy Malibu is the price you have to pay these days if you want Congress to hand you $18 billion. (If you only want $13 billion, you can do the trip in a Ford Escape, and if you can make do with just $7 billion, you don't even have to say what you're driving, as long as it's a hybrid.) After all, the government is trying to be responsible with taxpayers' money now; lawmakers won't just write a check to every big shot with a company plane who swings through town -- this ain't October anymore.
So the heads of the Big Three automakers were back in town Thursday, having learned a crucial lesson from last month's failed effort to secure billions and billions of dollars in federal aid -- to wit, they needed some vague idea what they plan to do with the cash once they get their hands on it. And also, ix-nay on the orporate-cay ets-jay. Chastened by just about everyone who watched their first attempt, the CEOs promised to cut their multimillion-dollar salaries to $1 a year, start flying commercial and -- less symbolically -- overhaul their product lines, ditching the gas-guzzling SUVs they've been making for years in favor of smaller cars that people actually want to buy. (General Motors told Congress it's thinking of parting with the Hummer line and will do the same with Saab and Saturn; Ford CEO Alan Mulally boasted that his company sold Aston Martin, Jaguar and Land Rover and may spin off Volvo, too.) Their strategy thus revised, the car companies felt comfortable enough to up their asking price significantly, from $25 billion the first time to $34 billion -- and possibly more -- this week.
The hearing, in the Senate Banking Committee, was a strange display from the Big Three -- a combination of a shameless grovel for money and a not so veiled threat that a second Great Depression would hit if they didn't get it. The firms can't survive without cash, they told the panel. "We are here because of the financial crisis that started in 2007 and accelerated at the end of the second quarter of 2008," Chrysler CEO Bob Nardelli said. The slump meant Chrysler lost $16 billion as customers opted not to buy new cars. "With such a huge hit to our sales and revenue base, Chrysler requires the loan to continue the restructuring and fund our product renaissance."
Actually, the CEOs were less alarmist than some of the other witnesses. Moodys.com chief economist Mark Zandi told the panel that the costs of not bailing out the car companies -- and letting them go bankrupt -- would be far, far more than $34 billion. "It's not even in the same universe," he said. United Auto Workers president Ron Gettelfinger said there wasn't much time to dither: "I believe that we could lose General Motors at the end of this month." And if Detroit goes under, the witnesses agreed, the rest of the country won't be in such good shape itself -- suppliers could also fail, whole local economies could fall apart, the government could find itself handling warranty claims on all the Jeep Cherokees out there.
The problem is that Congress -- having already dumped $700 billion onto Wall Street a few months ago, only to see most of it used to buy shares in banks rather than to vacuum up the toxic assets that sparked the financial crisis -- isn't necessarily inclined to move quickly on yet another big corporate bailout. "I don't trust the car companies' leadership," said Sen. Chuck Schumer, a New York Democrat. "I worry that, if they're left on their own, they'll be back a short time later asking for more, and we won't be better off. To hand money over with vague, unenforceable promises without an enforcement plan for viability isn't good enough."
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