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US auto chiefs renew bailout bid with $25b push

(Agencies)
Updated: 2008-11-19 07:56

Ford Motor Co Chief Executive Officer Alan Mulally led industry CEOs' personal push for $25 billion in emergency loans as details of the aid plan circulated on Capitol Hill and Senate approval this week remained in doubt.

A bankruptcy of one automaker is a "real serious concern" for the others, Mulally said yesterday in an interview on CNBC. When asked whether a bankruptcy filing would mean a liquidation and not a restructuring, he said, "I sure think so."

Congressional Democrats unveiled proposals on Monday, one bill in the House, another in the Senate, that would tap the $700 billion bank rescue package, giving seven to 10-year loans to domestic automakers and their suppliers. Taxpayers in return would get stock warrants, pay limits for top company executives and assurances that automakers would build more fuel-efficient vehicles.

The Bush administration opposes using money from the Treasury's Troubled Asset Relief Program to make the loans. White House spokeswoman Dana Perino on Monday repeated criticism that the plan wouldn't force automakers to improve and would divert funds intended to bolster financial markets.

"We're surprised that Senate Democrats would propose a bailout that fails to require automakers to make the hard decisions needed to restructure and become viable," Perino said in an e-mail. The plan amounts to a "raid" on money "needed to stabilize our financial system and encourage new lending to help our economy," the statement said. Mulally and CEOs Richard Wagoner of General Motors Corp and Robert Nardelli of Chrysler LLC testified yesterday at a hearing held by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat.

Ford would use government aid only if "things get worse" and the company exhausts its reserves, Mulally told CNBC. The hearing comes less than two weeks after auto chiefs pushed for aid in meetings with legislative leaders. They will make their case today in the House at a hearing chaired by House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat.

GM, Ford and Chrysler are seeking aid as industry-wide sales have plummeted to a 17-year low. GM this month said it lost $4.2 billion in the third quarter and almost $73 billion since the end of 2004, and that it may not have enough cash to get through the year.

The automakers are selling investments to get funds. Ford yesterday said it had agreed to sell 20 percent of Japanese affiliate Mazda Motor Corp, raising about $540 million. GM also yesterday completed the 22.4 billion yen ($233 million) sale of its 3 percent stake in Suzuki Motor Corp. "We are seeing a potential meltdown in the auto industry, with consequences that could directly impact millions of American workers and cause further devastation to our economy," Senate Majority Leader Harry Reid said.

Democrats hold a 50-49 edge, meaning even if all Democrats supported the measure, ten Republicans would also need to back it.

Senate Republicans including Richard Shelby and Jeff Sessions of Alabama, James DeMint of South Carolina and John Cornyn of Texas have criticized the proposal.