Auto Executives Face a Hard Sell on Capitol Hill
WASHINGTON — The chief executives of America’s foundering automobile manufacturers returned to Capitol Hill on Thursday and found themselves confronting years of pent-up anger, the harsh politics of a recession and the realization that even their strongest supporters might not be able to muster the votes to save them.
Fiscal hawks are worried that taxpayers will lose billions. Pro-labor lawmakers are furious that union workers are being blamed for causing the automakers’ problems, even as tens of thousands face layoffs. Environmentalists like House Speaker Nancy Pelosi are fed up after years of battles over fuel-efficiency rules. And Congress, as a whole, is suffering from acute bailout fatigue.
“I don’t want to raise expectations that that is going to be easy at all given the climate in the country,” Senator Christopher J. Dodd, Democrat of Connecticut, said after Thursday’s hearing before the banking committee, which he leads. “That’s a tall order.”
In a sign of the growing pessimism among the Democratic leadership, Mr. Dodd; Ms. Pelosi; Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee; and the Senate majority leader, Harry Reid of Nevada, wrote to President Bush after Thursday’s hearing urging him to rescue the auto industry.
Mr. Dodd supports a taxpayer rescue but called on the Bush administration or the Federal Reserve to save the automakers because Congress might not do so. Mr. Dodd said that he would persist in trying to reach a legislative agreement, even as it continued to be clear that Democrats in Congress, furious over how the administration has handled the $700 billion bailout of the country’s financial system, were reluctant to put more taxpayer money on the line.
There were almost as many reasons as there were lawmakers. Republican fiscal hawks, like Senator Bob Corker of Tennessee, suggested that the companies might be doomed after years of trailing their foreign competitors and might not be worthy of taxpayer expense.
Mr. Corker, whose state is home to Nissan’s North American headquarters, also asked why taxpayers should give Chrysler money when Cerberus, the private equity firm that owns 80 percent of Chrysler, was unwilling to invest any more of its own cash.
Confirming fears that taxpayers could lose out, the economist Mark Zandi, of Moody’s Economy.com, said that automakers probably needed much more than their requested $34 billion and perhaps as much as $125 billion. He predicted that the automakers would ask for more money by next fall.
Even among lawmakers who have supported government interventions in the past, bailout fatigue is now gripping much of Capitol Hill. Mr. Dodd and Senator Charles E. Schumer, Democrat of New York, said they favored helping the automakers but only with strict oversight by a board or special trustee, perhaps a Cabinet secretary, to be sure the companies used the money as intended.
But that proposal would require writing and passing complicated new legislation that could be difficult to achieve, given the tight calendar.
Senator Richard C. Shelby, the senior Republican on the panel, whose home state, Alabama, has sizable Toyota and Honda operations, has consistently voted against government interventions in private industry, including the Chrysler bailout in the 1970s and the recent rescue. But his criticism of Detroit was merciless. “The firms continue to trail their major competitors in almost every category necessary to compete,” he said.
Senator Bob Casey, Democrat of Pennsylvania, and other pro-labor lawmakers, said they resented that the United Automobile Workers union was being blamed for causing the automakers’ financial problems. “There wasn’t much discussion about the upcoming sacrifice and concessions that labor is making, and I was trying to point out some of the previous concessions they have made,” Mr. Casey said. “They are substantial.”
The White House said it stood ready to aid the auto industry by speeding up access to $25 billion in loans approved as part of a 2007 energy bill, an idea Ms. Pelosi has resisted, and accused the Democrats of trying to pass the buck after failing to win support for their own plan. “They can’t get Congressional support for their idea,” said Tony Fratto, the deputy White House press secretary. “So they want us to do it instead.”
After being sent home to Detroit empty-handed two weeks ago, the chief executives of General Motors, Ford and Chrysler made a show of contrition: driving to the Capitol in some of their most fuel-efficient vehicles to deliver the detailed reorganization plans that Congressional leaders had said were lacking last time. But within moments of the opening gavel it was clear that even a flawless presentation might not be enough.
Mr. Shelby grilled the executives about how they got to Washington, suggesting he regarded driving as a stunt. “Did you drive or did you have a driver? Did you drive a little and ride a little? And secondly, I guess are you going to drive back?”
That prompted Mr. Dodd, laughing, to interject: “Where did you stay? What did you eat?”
“The chairman wants to make light of this,” Mr. Shelby said. He was not smiling. And he got his answers. It was hardly the only uncomfortable moment for the executives, Rick Wagoner of G.M, Alan R. Mulally of Ford, and Robert L. Nardelli of Chrysler.
G.M., in particular, is in dire straits with some predicting that the company might be forced into bankruptcy. From the start, the executives took an apologetic tone in making their cases for the government-financed bailout: G.M. asked for $12 billion in loans and a $6 billion line of credit; Ford for a $9 billion line of credit that it can draw on if needed; and Chrysler for an immediate $7 billion loan.
“We’re here today because we made mistakes, which we are learning from, and because some forces beyond our control have pushed us to the brink,” said Mr. Wagoner. “Most importantly, we’re here because saving General Motors, and all this company represents, is a job worth doing.”
Ford is not seeking loans for now. But its chief executive, Mr. Mulally, echoed the comments of his counterparts at G.M. and Chrysler that an automobile company could not survive a bankruptcy filing.
“Any threat of a company going into bankruptcy would really, really hurt sales,” Mr. Mulally said. “Sales would fall off so fast that you couldn’t restructure fast enough.”
Much of the questioning from senators zeroed in on whether the companies were simply seeking loans to forestall inevitable failure. But over the course of nearly six hours of questions, some lawmakers belittled or dismissed aspects of the companies’ plans. In a reminder that the automakers are seeking help after a long line of banks before them received taxpayer funds, many with few strings attached, a large chart stood just to the side of the dais titled, “Taxpayer-Funded Bailouts.”
With large blue bars, it showed $300 billion for Citigroup; $200 billion for the mortgage giants, Fannie Mae and Freddie Mac; $150 billion for the insurance conglomerate, American International Group; $29 billion for the failed investment bank, Bear Stearns.
At the bottom of the chart were three more blue bars, each with a red question mark after them: $18 billion for General Motors; $13 billion for Ford; $7 billion for Chrysler.
Perhaps the only consensus at the hearing was that the automakers, particularly G.M., were in grave trouble and that the government might have no good options at this point. Mr. Zandi, of Moody’s, said allowing one or more of the companies to fail would be disastrous. “Bankruptcy at this point in time would be cataclysmic for the economy,” he said. “So I think you need to help them now.”
But some conservative lawmakers have called for letting one or more of the Big Three fail. Senator Mike Crapo, Republican of Idaho, repeatedly pressed the question about bankruptcy as an option during Thursday’s hearing.
Senator Robert Bennett, Republican of Utah, raised a new idea that would call on financial firms receiving assistance under the Treasury’s $700 billion program to convert any auto company debt that they hold into equity stakes, easing the cash liquidity problems of the Big Three, and potentially allowing additional infusions of government cash into the financial firms.
Mr. Casey said that Congress must act. “For me, this debate is pretty simple: as complex as the financing, as complex as the challenges are, it’s about jobs,” he said. “The atmosphere in America today is frankly pretty negative for any kind of assistance,” he said. “We have some work to do to get the votes that we need.”
“Nothing concentrates the mind like a death sentence,” Mr. Dodd said. “And we’re looking at a death sentence here if we don’t respond.”Bill Vlasic contributed reporting from Washington and Nick Bunkley from Detroit.