Automakers Assemble Make-or-Break Case
Executives Return to Congress to Plea for $25 Billion in Loans

By Kendra Marr
Washington Post Staff Writer
Tuesday, December 2, 2008

In its second attempt to persuade Congress to grant the U.S. auto industry $25 billion in emergency loans, Chrysler plans to make the case that automakers can cut their costs and point to the future by forging an alliance to share fuel-efficient vehicle technologies.

Ford will tell lawmakers that it intends to retool plants for smaller, more fuel-efficient cars as a part of its goal of becoming the fuel-efficiency leader in every vehicle category. General Motors will address its $43.3 billion debt burden and an upcoming multibillion-dollar payment to a union-run trust that will cover employee health-care costs.

Detroit's Big Three automakers are all scrambling to reassure Congress that any money they receive will not be squandered. An appearance two weeks ago by the chief executives failed to secure the loans. Lawmakers sent them away with orders to return with detailed business plans.

Those plans are due to be delivered today.

While the automakers rushed to prepare for another round of congressional hearings this week, lawmakers grappled with how they would evaluate the business plans. Sen. George V. Voinovich (R-Ohio) sent a letter to Senate Majority Leader Harry M. Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.) yesterday, expressing concern over who would judge the plans.

"I question your decision that congressional leadership and committees of jurisdiction are best positioned to make determinations about a multinational corporation's future financial prospects," he wrote.

In their own letter to automakers last week, Reid and Pelosi said they "intend to give pertinent agencies within the executive branch, the Government Accountability Office, the Board of Governors of the Federal Reserve, as well as outside experts, the opportunity to comment on [the automakers'] work."

The automakers' plight is likely to come into clear view today when companies report their sales figures from November. Analysts predict yet another month of sliding sales as the global credit crunch continued to immobilize business.

Chrysler and GM are in jeopardy of running out of money within months. Barclays Capital analyst Brian A. Johnson wrote in a research note last week that Ford is likely to fall below minimum cash levels in the second half of 2009, which would force it to tap available credit lines or request government assistance.

Anticipating another round of harsh criticism in congressional hearings this week, the United Auto Workers sent Congress documents yesterday to try to dispel what it considered to be myths about high labor costs and the virtues of pre-packaged bankruptcy.

Commerce Secretary Carlos M. Gutierrez said in an interview that the administration has been careful "not be prescriptive" about what the automakers need to do specifically.

"We believe there is a fine line between giving them a standard for the use of taxpayer money and giving them some general thoughts on what we hear, we read, we study," he said. "That should be considered. But it's not our job to tell them what specific actions to take. It's their job."

Chrysler will propose industry-wide collaboration to create advanced-technology vehicles, said people familiar with the plan. Chrysler chief executive Robert L. Nardelli touched on collaboration in testimony before the Senate Banking Committee last month. The government could "create a national science center where rather than paying each of us a dollar to develop the same technology, we'd pay $1," Nardelli said. "That technology would then be transferred over to the auto companies. It would make the $25 billion go further. It would be more cost-effective. If it became a wholly owned affiliate, you can get private equity to invest in it and then market that."

Chrysler also plans to highlight its success in partnering with other companies to expand its product lines, said people familiar with the matter. For instance, this year Chrysler partnered with Nissan to build cars for each other. Chrysler would build a full-size pickup truck for the Japanese automaker in exchange for a small, fuel-efficient car.

Ford, meanwhile, said yesterday that it is considering selling the Swedish automaker Volvo to raise cash to strengthen its balance sheet.

Chief executive Alan R. Mulally also pledged to skip the corporate jet and return to Washington by car.

Some members of Congress had criticized the chief executives for traveling to the first set of hearings by corporate jet. Company spokespeople for Nardelli and GM chief executive G. Richard Wagoner Jr. said the top executives would not fly on company planes this time, but they would not disclose the mode of travel.

Congress may vote on the loan package on Monday, though the source of the money to fund the loans has yet to be determined. Some Democrats are advocating allocating a slice of the Treasury Department's $700 billion financial rescue package. But the Bush administration has stressed its preference for redirecting money from a $25 billion program to build fuel-efficient vehicles.

In recent days, Gutierrez has been working to reverse lawmakers' reluctance to use those fuel-efficiency funds.

"It's important that we not open [the financial rescue package] up other industries," he said. "Because where do we stop?"