Auto Execs Set for More Grilling on Aid Plan
WASHINGTON (Reuters) - Auto executives headed to Capitol Hill for a second day to argue their case for a $25 billion aid package in the face of mounting political opposition to another huge government bailout.
The Wednesday hearings are slated to start at about 10 a.m. before the House Financial Services Committee.
In Senate hearings on Tuesday, Rick Wagoner, the head of General Motors Corp, made it very clear that the executives felt compelled to appear before Congress this week.
"This is about much more than just Detroit," Wagoner said in his testimony. "It's about saving the U.S. economy from a catastrophic collapse."
The weakened economy and global credit crisis pushed the U.S. government into bailing out companies including insurer American International Group Inc, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.
Scheduled to testify on Wednesday are Wagoner; Robert Nardelli, head of Chrysler LLC; Alan Mulally, CEO of Ford Motor Co; Ron Gettelfinger, head of the United Auto Workers union; Annette Sykora, chairman of the National Automobile Dealers Association; James McElya, CEO of Cooper-Standard Automotive Inc; Jeffrey Sachs, professor at Columbia University, and Matthew Slaughter, professor at Dartmouth's Tuck School of Business.
The auto executives were expected to repeat much of what they said on Tuesday when, for the first time, they confirmed how much they are asking from the government. General Motors is seeking between $10 billion and $12 billion, Ford is seeking roughly $8 billion and Chrysler would get $7 billion.
The problems in the autos industry are not limited to the United States.
Reeling from a relentless sales slide, Toyota Motor Corp said it would shut down all of its North American factories for two days next month, while rival Nissan Motor Co renewed its pessimism over the industry's near-term prospects.
Toyota, the world's biggest automaker, had already canceled all U.S. production of slow-selling light trucks for three months this summer. A spokeswoman said production would be reduced further in 2009 at three U.S. assembly plants.
Carlos Ghosn, chief executive of Nissan and Renault SA, speaking separately in Washington, chimed in with his own bleak view of the sector's short-term prospects with a reminder that Nissan was expecting virtually no profit in the October-March second half.
GOOD FOR THE GOOSE, GOOD FOR THE GANDER?
Automakers across Europe were looking to get their share of government handouts as industry leaders in Britain, Germany and Italy all made cases for their piece of the pie.
European carmakers need financial aid, senior EU officials also said, singling out GM unit Opel as a possible emergency case.
European auto companies have asked for 40 billion euros ($50.5 billion) of soft loans for the industry. Opel is negotiating aid with the German government.
"Targeted and temporary measures to support European producers might be useful, in part to increase technological and ecological performance," French Minister for European Affairs Jean-Pierre Joyuet told the European Parliament.
Also on Wednesday, German solar energy company SolarWorld said it was prepared to acquire cash-strapped carmaker Opel's plants in Germany, but analysts dismissed the plan as unrealistic and GM said Opel was not for sale.
Bonn-based SolarWorld said it wanted to turn Opel into the first "green" auto company in Europe, making its offer conditional on a complete separation of Opel from GM.
Britain's car manufacturers are also demanding access to government funds put aside to bail out the banking sector.
Industry bodies the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation wrote to Chancellor Alistair Darling asking for a series of emergency measures to help combat the downturn.
In Italy, Fiat SpA CEO Sergio Marchionne said that possible government aid for Europe's ailing car industry should be broad based.
"Either (aid) is for everyone or for no one," Marchionne said on the sidelines of a conference between Italian and Brazilian business leaders.
U.S. auto executives warned Congress on Tuesday that the industry was teetering on the brink of disaster.
"While the domestic auto industry has made mistakes in the past, the current problems have been exacerbated by one of the worst economies in nearly three decades," Mulally said.
"We are hopeful that we have enough liquidity based on current economic planning assumptions and planned cash improvement actions, but we know that we live in tumultuous economic times."
The most shaky of the U.S. companies could be Chrysler, owned by private equity firm Cerberus LLC.
"We are willing to provide full financial transparency, and welcome the government as a stakeholder -- including as an equity holder," Robert Nardelli, the head of Chrysler, said in his testimony.
He said that without immediate financial help, the company may lack sufficient capital to continue operating and that Chrysler looked at a pre-packaged bankruptcy and other alternatives before deciding to apply for the federal funds.
"We are in a very fragile situation," he said.
A major question of the bailout is how the companies will deal with its union workforce.
The UAW's Gettelfinger said the situation facing GM, Ford and Chrysler is dire.
"If the government does not act to provide immediate assistance, GM, Ford and Chrysler could be forced to liquidate," the union head said.
"If one of these companies was to go into bankruptcy, I would almost bet it would take (down) two of them or possibly all three," Gettelfinger added.
Senate bailout legislation would impose conditions on the industry, but it is unclear whether those conditions would be enough to satisfy critics.
"The Detroit Three are rapidly running out of cash and face filing for Chapter 11 reorganization," Peter Morici, economist at the University of Maryland, testified. "It would be better to let them go through that process and re-emerge with new labor agreements, reduced debt and strengthened management."
Morici added that, "I would suggest if you give them $25 billion this month, they will be back."
(Additional reporting by Reuters bureaus worldwide; writing by Patrick Fitzgibbons; Editing by Steve Orlofsky)
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