US automakers plead for bail-out with skeptical Congress
Nov 18, 2008, 22:03 GMT
Washington - Chiefs of the three US automakers went before Congress on Tuesday seeking an emergency injection of government money to stave off bankruptcies that could cost the US economy millions of jobs.
The so-called Big Three - General Motors Corp, Ford Motor Co and Chrysler LLC - are asking for 25 billion dollars from the 700- billion-dollar financial rescue package passed in October, arguing that the ongoing credit crisis has pushed their already struggling industry to the brink of collapse.
'The recent plunge in vehicle sales threatens not only the company's turnaround but in fact our real survival,' GM chief executive Rick Wagoner told the Senate Banking Committee.
US auto sales have plummeted as consumers struggled to obtain car loans, a repercussion of the US mortgage market meltdown that has curtailed lending in many different sectors. Auto sales tumbled 32 per cent in October to their lowest level since 1991.
'We are asking for assistance for one reason: to address the devastating automotive industry recession caused by our nations' financial meltdown,' Chrysler chief executive Robert Nardelli said.
Executives and legislators warned that a collapse of even one of the three carmakers, all centred in the traditional car-making hub of Detroit, Michigan, could result in the loss of as much as 3 million jobs at a time where the US economy is already likely in recession.
The industry as a whole accounts for about 4 per cent of US economic output, but its reach stretches well beyond the automotive sector itself.
'This is not just any industry. It has critical implications for our country,' said Democratic Senator Christopher Dodd, chairman the Banking Committee.
But the Big Three executives faced a group of lawmakers skeptical that the US auto industry was worthy of rescue after a decade of failed strategies favouring out-of-date, petrol-guzzling vehicles.
'Are we here in the Senate being asked to facilitate a stronger, more competitive auto manufacturing sector or to perpetuate a market failure?' asked Senator Richard Shelby, the top Republican on the committee.
The auto industry has already seen 25 billion dollars approved as part of separate legislation earlier this year to develop lower- emissions technology, but has sought another 25 billion dollars from the government's financial rescue package to remain solvent.
Most Democrats in Congress support the automotive bail-out but have run up against opposition from Republicans and the administration of President George W Bush, who leaves office on January 20.
Treasury Secretary Henry Paulson earlier Tuesday said that the October bail-out should be strictly limited to stabilizing the financial sector but suggested that more money could be appropriated under the emissions legislation already passed.
New legislation could be voted on by the full US Senate as soon as Wednesday, but Republican opposition means the rescue is more likely to pass both chambers only after president-elect Barack Obama takes office in January. Obama has called the auto industry the 'backbone' of the US economy and promised aid.
The European Union has voiced opposition to the bail-out, arguing that it amounts to protectionism. European Commission President Jose Manuel Barroso suggested last week that he may bring the United States before the World Trade Organization if the bail-out goes ahead.
A declaration after Saturday's summit of the Group of 20 countries made clear that protectionist policies should not be adopted as an answer to the global economic crisis.
Even supportive lawmakers made clear that any government rescue would be accompanied by tough conditions, including a sound business plan and investment in greener, more energy-efficient vehicles.
'We need them to reassure us they won't come back in six months,' said New York Senator Chuck Schumer, a Democrat.
Ford chief executive Alan Mulally sought to assure lawmakers that his company already had an extensive recovery plan in place, but said the bail-out was needed 'to help bridge the domestic auto industry through these difficult economic times.'