Automakers request $34 billion, warn of bankruptcy risks

WASHINGTON, Dec 02, 2008 (Detroit Free Press - McClatchy-Tribune News Service via COMTEX) -- GM | Quote | Chart | News | PowerRating -- General Motors Corp. and Chrysler LLC warned Tuesday they could collapse without federal aid before the end of the month, as they joined with Ford Motor Co. to urge lawmakers to grant them $34 billion in loans.

Congressional leaders and the Bush administration withheld judgment on the plans ahead of hearings Thursday and Friday. All three companies' chief executives agreed to symbolic steps urged by Congress, including salaries of $1 a year and the elimination of corporate jets to make their case more palatable, and they arrived from Detroit in hybrid vehicles to underscore the point.

Combined with a 37 percent plunge in sales for November, the automakers portrayed an industry out of time, money and options.

Chrysler LLC warned it needs $7 billion before the end of the month, while General Motors Corp. needs $4 billion, in both cases to avoid running short of cash to pay suppliers and other bills in January.

"Absent such assistance, the company will default in the near term," GM told lawmakers, "very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy."

GM's total request now tops $18 billion, with $12 billion in loans and an additional $6 billion as an emergency line of credit should the economy continue to worsen. In return, GM pledged to shed four of its U.S. brands, nine factories, up to 31,500 workers and roughly $30 billion in debt through 2012, all to make a profit excluding taxes by 2011.

"There isn't a plan B," said GM President and Chief Operating Officer Fritz Henderson. "Absent support, the company can't fund its operations."

Only Ford Motor Co. offered a brighter outlook, requesting a $9 billion government credit line that it said it would tap should the economy weaken further.

"We think we're going to be able to get through this and get back to profitability, and be a very viable company in 2011," said Ford Chief Executive Alan Mulally, who pledged to accept a $1-a-year salary only if Ford took the loan.

Congressional leaders downplayed the festering question of where the money to aid the industry would come from, vowing unspecified action. Senate Majority Leader Harry Reid, D-Nev., said he would bring a bill to the Senate floor Monday that could kick off the process.

"We're already spending a lot of money on a lot of things. We can't be throwing good money after bad," Reid told reporters Tuesday. "I'm hopeful and I'm somewhat confident that they can come up with something that will give us the ability to show that they are viable. It's up to them."

House Speaker Nancy Pelosi was more upbeat, saying some kind of help was likely, and told House members that a session next week was possible.

"I believe an intervention will happen, either legislatively or from the administration," said Pelosi. "I think it's pretty clear that bankruptcy is not an option."

But after a failed attempt to win $25 billion in loans last month, the industry's allies on Capitol Hill say more lobbying will be needed simply to convince enough lawmakers that the Detroit automakers are worth saving. Michigan Sen. Carl Levin called on President George Bush and President-elect Barack Obama to get more involved in the debate, and be "not just sort of in the background."

"This administration has to face this, and the next administration has to face this, and there needs to be a much greater focus on both," Levin said. "If this thing is going to happen next week, it's going to happen with ... the active support and assistance of the current president and the president-elect."

A spokesman for Obama declined to comment. Michigan Gov. Jennifer Granholm said Tuesday that she urged Obama in a meeting Tuesday in Philadelphia to support aid for the industry.

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Democrats contend the Bush administration has the power to use the $700 billion financial industry bailout to help the industry. Pelosi criticized the administration Tuesday, saying its lack of standards for how the bailout money would be used by financial firms compared poorly to Congress' demands for detailed restrictions on automakers' aid.

The administration has said it wanted any aid to come from the $25 billion set aside in September for retooling plants. Reid said Tuesday that $20 billion of that already has been requested, and the automakers all said they had counted on such loans as part of their restructuring plans.

White House spokeswoman Dana Perino said the administration had not had time to review the plans, and that the original $25 billion loan idea was "quite generous."

"We are sticking to our guns that the companies have to prove that they are viable before the taxpayer dollars should be given to them," she said.

But Levin and other lawmakers stepped back from that debate Tuesday, saying it was more important to build momentum for a rescue first.

"The key issue is whether or not a majority of both houses ... believe that the American economy requires the auto industry here receive these bridge loans," Levin said. If so, "one way or the other, the source of the funding will be worked out."

The companies said they did not collaborate in putting their plans together, only sharing data about estimates of sales in future years. But all hewed to the requests from Pelosi and Reid, emphasizing commitments to more fuel-efficient models and viable business plans, while warning that any form of bankruptcy could crush their operations.

The Center for Automotive Research has estimated that 3 million jobs could be at risk in one year following a GM bankruptcy.

GM said its collapse would cause "catastrophic damage to the U.S. economy," with failures rippling through suppliers to other automakers, dealers and financial firms."

Of the three, only Chrysler left open the possibility of a merger with another company, saying partnerships, alliances or a consolidation are a "fundamental element" of the company's plan. Chrysler did not appear to ask for more than $7 billion, saying it would begin repaying the loan in 2012.

All three automakers plan to meet with the UAW Wednesday in Detroit to debate what cost savings could be wrung from the union contracts. UAW President Ron Gettelfinger has said he was open to all options, including reopening the deals.

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(Detroit Free Press reporters Chris Christoff and Sarah A. Webster contributed to this report.)

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(c) 2008, Detroit Free Press.

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