pigeha: Carmakers, senators discuss aid conditions

WASHINGTON -- Key senators told Detroit automakers today they were willing to consider granting a portion of the $34 billion they were seeking for survival in return for strict conditions and proof by March 31 on progress in reworking the companies.

While a few senators said bankruptcy should remain an option for General Motors Corp. or Chrysler LLC, the consensus appeared to form that letting the automakers fail would only deepen a growing recession. Sen. Chris Dodd, D-Conn., who called the hearing and would oversee any plan in the Senate, said doing so “plays Russian roulette with the entire economy.”

“We need to act,” he said. “Not for the purpose of helping a handful of companies. If that were the case, I would let them fail.”

The tone was a marked change from two weeks ago, when several senators suggested the industry might not be worth saving, and criticized the automakers for lackluster presentations.

Many on the committee, and the automakers themselves, said they favored a government overseer or board with broad powers to revamp the industry. One senator suggested such a position could require GM and Chrysler to merge -- an idea the two companies said could save up to $10 billion annually, and one the chief executives did not oppose.

In fact, there were few conditions that the automakers suggested they would not agree to. Chrysler Chairman Bob Nardelli said he’d be willing to resign as part of a government-ordered merger, while GM Chairman Rick Wagoner said the company would even agree to file for bankruptcy if it could not prove progress on its survival plan by March 31.

But Dodd repeatedly warned that getting Congress to act by next week remained a tall order. Congress may return next Monday, but only if there’s a strong chance a rescue could pass.

“We’ve got to be a lot further along than we are today,” he said. “I believe we’ve got the makings of putting something together. … I’ve got a working situation here.”

The committee’s chief Republican said he would vote against any rescue.

“These are not a serious set of plans,” said Sen. Richard Shelby, R-Ala. “If you made this presentation to get a bank loan, I think any sensible banker would dismiss your request.”

GM has said it needs $18 billion, with $4 billion before the end of the year, while Chrysler says it needs $7 billion to survive. Nardelli changed the company’s request during the hearing, saying it could get by with a $4 billion infusion before the end of the year, rather than requiring all $7 billion up front.

All warned of the damage that would be wreaked by their failure. A study released by the Economic Policy Institute today said that up to 3.3 million jobs in the United States could be lost if one or more automakers went bankrupt within the next year.

Michigan alone could lose over 400,000 jobs -- nearly 9% of its workforce, the study said. UAW President Ron Gettelfinger warned that the industry was “down to the wire.”

“I believe we could lose General Motors by the end of this month.”

The automakers had said they would accept a federal oversight board that would keep track of the government’s loans. GM had said such a body might have to help it negotiate steep cuts in its debt with bondholders.

But several senators said they wanted the government to have far more power over the companies’ finances, saying there was no other way to guarantee that taxpayers would get a return on their investment.

“We want to see the conditions before we give you the money. You want the money and say let’s see how the conditions work out,” said Sen. Charles Schumer, D-N.Y. “I don’t think there’s any faith that those three months will work out given past history.”

Sen. Robert Bennett, R-Utah, asked whether the government shouldn’t make a merger of GM and Chrysler a condition of aid, noting their talks earlier this year and the overcapacity in the auto industry.

Such a deal “is a good idea,” he said. “It’s not a shotgun wedding, it’s a marriage that makes sense.”

Experts chosen by the committee to testify said Congress should provide strong oversight of any loans it makes. Mark Zandi, chief economist of Moody’s Economy.com, said $34 billion would likely not be enough to prevent an automaker from declaring bankruptcy in the next two years, and that the cost to save them might run from $75 billion to $125 billion.

But Zandi also recommended Congress provide the loans the Detroit automakers are seeking in two payments, with the second payment withheld until they prove progress on their restructuring.

“There is a considerable risk the plans will not be executed effectively,” he said. “It will be extraordinarily challenging for them to make substantial changes to make their plan work.”

pigeha

пятница, 5 декабря 2008 г.

Carmakers, senators discuss aid conditions

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