Auto Giants Ratchet Up Pleas for Aid
Wednesday, December 3, 2008
General Motors, an icon of American manufacturing and the world's largest automaker, yesterday threw itself at the mercy of Congress, saying it needed $4 billion to avert a cash crisis by the end of the month and as much as $18 billion in federal loans over the next year.
GM and its U.S. rivals Chrysler and Ford all pleaded for government loans, promising in return to use the opportunity to slash costs, jettison brands, restructure their finances and speed the introduction of fuel-efficient vehicles widely considered crucial to their future.
Together the three auto giants sought at least $28 billion and as much as $38 billion in government assistance, more than the $25 billion they requested just two weeks ago. Battered by the lowest car sales in a quarter century and tight credit conditions, the companies said they needed the money just to survive the next year.
"There is no plan B," said Fritz Henderson, GM's president and chief operating officer.
It was a humble moment for the three auto behemoths, which once were synonymous with American ingenuity and industrial might. Over the past three decades, they have lost ground to more agile foreign rivals that favored smaller cars built by non-unionized labor at lower wages.
This year the combination of high fuel prices and the paralysis in the credit markets has brought the U.S. companies to the brink. Chrysler yesterday sought $7 billion by the end of the month. Ford, which is in stronger financial condition, asked Congress to set aside as much as $13 billion to help the company if the economic downturn deepens.
The companies presented their plans yesterday, a deadline set by Congress, but there was no guarantee that wary lawmakers would agree to pump taxpayer money into firms that might not be financially viable.
House Speaker Nancy Pelosi (D-Calif.) said yesterday that Congress would not adopt a loan package for the automakers unless the ailing giants presented "a new business model, a new business plan" that was "worthy of the support that the taxpayers will invest in it."
But she also said that "bankruptcy is not an option" and predicted that either Congress or the Bush administration would intervene to prevent a collapse of the industry. Senate Majority Leader Harry Reid (D-Nev.) told reporters he expects to call the Senate back into session early next week with the aim of passing a bill by next Friday.
The chief executives of the three companies all seemed mindful of the drubbing they took two weeks ago when they sought taxpayer assistance. Excoriated for traveling by corporate jets to testify in Washington, all said they would make the 500-mile return trip by car this week for the new round of hearings. Ford and GM even said they would part with the aircraft permanently.
Ford chief executive Alan R. Mulally and GM chief executive G. Richard Wagoner Jr. also offered to cut their salaries to $1 a year if the government provides aid. Chrysler already pays chief executive Robert L. Nardelli that sum in salary. GM said it would also roll back other executives' pay.
The magnitude of the crisis, as portrayed by the companies, is daunting. Though the three companies described a dire situation two weeks ago, the situation seems even more grave now. GM said will need $12 billion by late March to keep operating. If the recession drags on, it might ultimately need up to $18 billion.