Automakers change their tune while asking for bailout

Big 3 CEOs return to plead for up to $34 billion from Congress
Posted: 10:30 AM ET

From CNNMoney.com Senior Writer Chris Isidore

As sales plunge, the Big Three are back to plead for a bailout.

(CNNMoney.com) — The CEOs of the leading automakers were back before Congress Thursday, arguing for a larger bailout than they asked for just two weeks ago, and hoping to undo the damage they did to their case at the earlier hearings.

The three automakers are now asking for up to $34 billion in federal loans, up from their earlier request for $25 billion in assistance. Two of them, General Motors and Chrysler LLC, are warning that without immediate help, they could run out of the money they need to operate before the end of the year.

This time GM CEO Rick Wagoner, Ford Motor CEO Alan Mulally and Chrysler CEO Robert Nardelli drove fuel-efficient hybrids to Washington, rather than flying in on corporate jets as they did two weeks ago.

Ford and GM have since announced they will sell their jets. And all three CEOs have agreed to cut their pay to $1 a year if they get the federal help they are seeking.


After presenting plans to Congress Tuesday that detailed how they would use loans to return to profitability, each company warned of tremendous damage to the economy if they are forced to file for bankruptcy because of lack of help.

In prepared testimony Thursday, Mulally quoted an estimate from Goldman Sachs that said the impact to the economy from failures could be up to $1 trillion.

But the Big Three face an uphill battle to get loans approved by a skeptical Congress. Even the Democratic leaders of the House and Senate who are in favor of help for the automakers have refused to commit to calling the outgoing members of Congress back next week to vote on an auto bailout.

Congressional leaders are concerned that public opinion has turned strongly against help for the automakers. A CNN/Opinion Research Corp. poll of nearly 1,100 Americans conducted earlier this week found 61 percent oppose a bailout while only 36 percent support it. Even in the Midwest, home to most of the automakers' remaining plants, 53 percent of those polled said they oppose federal help.

That was a sharp reversal from polls taken before the CEOs last trip to Capitol Hill. A poll November 11 and 12 conducted by Peter D. Hart Research Associates found 55 percent supported federal assistance for automakers at that time, and only 30 percent believed they should not get federal help.

WASHINGTON – Amid fresh assembly line layoffs, congressional Democrats and the White House reached for agreement Friday on about $15 billion in bailout loans for the beleaguered auto industry. President George W. Bush warned that at least one of the Big Three carmakers might not survive the current economic crisis.

Several officials said House Speaker Nancy Pelosi of California and White House Chief of Staff Josh Bolten spoke by phone. While no details of their conversation were available, it appeared the House's top Democrat had dropped her opposition to Bush's insistence that the aid come from a fund set aside for the production of environmentally friendlier cars.

The developments came as desperate auto executives pleaded for a second straight day with lawmakers for loans to help them survive, and the government reported the worst single month's job loss in 34 years.

Pelosi's office issued a statement saying legislation would come to a vote in the House next week. The Senate is also scheduled to be in session to consider steps to aid Detroit's Big Three.

"Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry," Pelosi statement said.

It did not say so, but numerous officials confirmed that she had bowed to Bush on the point that had blocked agreement for weeks.

Officials in both parties also said the legislation would include creation of a trustee or group of industry overseers to make sure the bailout funds were used to transform General Motors Corp., Ford Motor Co. and Chrysler LLC into competitive enterprises.

At the White House, Bush declared the economy was in a recession, and he urged a gridlocked Congress to act quickly on a multibillion-dollar industry bailout — with taxpayer protections.

"We are going to have to have some give here," replied Massachusetts Rep. Barney Frank, a senior House Democrat, expressing optimism that compromise might be possible. It wasn't clear whether he was prodding Bush or Pelosi — who have disagreed sharply on the terms of any bailout — or both.

Republicans said there had been no lessening in Bush's refusal to tap the $700 billion financial industry bailout fund to help the automakers



PATTI

WASHINGTON – It will take more than one "car czar" to help get the embattled U.S. auto industry back on track, President Barack Obama has decided. Instead, his administration is establishing a presidential task force to direct the restructuring of General Motors Corp. and Chrysler LLC, a senior administration official said Sunday night.

Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers will oversee the across-the-government panel, the official said, speaking on the condition of anonymity because no announcement has been made.

GM and Chrysler are expected to submit restructuring plans to the government by Tuesday, the deadline for showing how they can repay billions in loans and become viable in spite of a huge drop in auto sales.

The auto industry task force is just one element of Obama's plan to revive the flailing economy. On Tuesday he's flying to Denver to sign the $787 billion stimulus bill into law, taking his economic message to the American people, who are giving him high marks for handling the crisis.

Obama will also be tackling the home mortgage foreclosure crisis. The direct appeals for public support follow scant GOP backing in Congress for his agenda and increasing partisan bickering.

Passage of the stimulus measure — unprecedented in its cost — was a major victory for Obama as he struggles to lift the country from a financial nosedive unseen since the Great Depression of the 1930s.

"I think it's safe to say that things have not yet bottomed out," press secretary Robert Gibbs said Sunday. "They are probably going to get worse before they improve. But this is a big step forward toward making that improvement and putting people back to work."

The symbolism of the stimulus signing is obvious for Colorado, where a growing green-energy industry will draw major benefits from the plan.

And Obama seems likely to continue selling that recovery by traveling around the country.

"He is determined to keep in touch with the American people who sent him here to do this job," senior adviser David Axelrod said.

With the stimulus victory in hand, Obama planned to shift to the housing crisis with an announcement Wednesday in Phoenix.

Obama was expected to offer help to homeowners on the brink of foreclosure. Details have not been disclosed, but the nature of the crisis suggested mortgage loans would have to be revalued downward along with interest rates.


PATTI

I really hope he can help homeowners can get a break from this upcoming plan, as for the car dealerships, i'm torn, they received help and are still bitching for more and GM is giving ultimatums.