WASHINGTON â€” Their fates now in the hands of lawmakers, Detroitâ€™s Big Three automakers are girding for congressional hearings later this week to determine if theyâ€™ll receive a $34 billion government bailout or face the prospect that at least one of them might go bankrupt.
An estimated 3 million jobs are tied directly or indirectly to the fortunes of General Motors, Ford and Chrysler.
On Tuesday they presented their plans for how theyâ€™d use government rescue money and how they plan to return to profitability. The chief executives of Ford and GM reportedly were driving to Washington in fuel-efficient cars to signal their support for accelerating production of vehicles that get better gas mileage.
The automakers promised to downsize their manufacturing operations, move faster to improve fuel economy, speed their efforts to make hybrid cars, trim their dealership networks and rein in executive pay.
Despite whatâ€™s sure to be a tough battle in Congress, the troubled automakers got an important nod late Tuesday from House Speaker Nancy Pelosi, D-Calif., who said that no U.S. carmaker would be allowed to fall into bankruptcy.
â€œI believe that an intervention will happen. Itâ€™s pretty clear that bankruptcy is not an option. Everybody is disadvantaged by bankruptcy, including our economy,â€ she said.
Senate Majority Leader Harry Reid, D-Nev., agreed.
â€œI want to do what we can to save the automobile industry â€” itâ€™s part of what we have left of our manufacturing base,â€ he said.
Ultimately, the question is not where Congress can find the money, Reid said, but â€œwhether there is accountability and viability. Weâ€™re already spending a lot of money on a lot of things. We canâ€™t be throwing good money after bad.â€
GM said it needs $4 billion by the end of December to remain in the black, another $8 billion to get through the current economic crisis, and a $6 billion emergency line of credit. It said it expects to have â€œfull labor cost competitivenessâ€ in the U.S. with overseas-based automakers such as Nissan and Toyota by 2012.
Translation: GM expects more concessions from the United Auto Workers union.
Ahead of congressional hearings on Thursday and Friday, the Big Three and heads of the UAW planned to have an emergency meeting Wednesday to focus on shared cost-cutting that would involve further labor concessions.
The bailout math also changed Tuesday. An earlier call for $25 billion rose to at least $34 billion, as Ford asked for $9 billion, GM sought $18 billion and Chrysler asked for $7 billion. GM and Chrysler may have to seek bankruptcy protection soon if they donâ€™t get a short-term loan, analysts have warned.
Skepticism remains widespread in Congress â€” a vivid reminder of the uphill battle needed to pass the $700 billion rescue package for the financial sector in October.
Both Reid and Pelosi signaled Tuesday that a special energy loan program cited as a possible source for auto-bailout funds could face trouble. However, Pelosi, who opposes using that program because it would set back environmental goals, said that letting one or more of the companies go bankrupt also isnâ€™t an option.
Pelosi wants to use money from the $700 billion financial-sector bailout that passed in October, but the Bush administration wants that money limited to banks and other financial institutions. Pelosi wouldnâ€™t offer a specific alternative, but spokesman Brendan Daly said more money could be appropriated. He said many other options are being discussed.
Hearings Thursday and Friday before Senate and House committees will be crucial in determining not only the shape of any package, but whether it can gain the public support thatâ€™s been lacking.
Sen. Carl Levin, D-Mich., voiced confidence that the automakersâ€™ new plans would do the job.
â€œThese are comprehensive and detailed road maps,â€ said Levin, an ardent supporter of his stateâ€™s auto industry, adding that he was sure that â€œthese plans will satisfy the Congress.â€
Pelosi, though, wanted to see and hear more. She said the plans needed to fill several requirements, including a precise commitment to a more fuel-efficient future, long-term viability and accountability to taxpayers, and a new business plan that among other things would curb executive pay.
In its plan to Congress, the first to be made public, Ford said it can survive the current downturn â€” but warned that the Big Three automakers share suppliers. Should GM or Chrysler go bankrupt, it would hit their common suppliers and thus Ford.
â€œWe have 80 percent overlap in supplier networks. Nearly 25 percent of Fordâ€™s top dealers also own GM and Chrysler franchises. That is why the collapse of one or both of our domestic competitors would also threaten Ford,â€ its business plan said.
The proposed auto industry bailout comes amid mounting economic challenges. The National Bureau of Economic Research on Monday officially declared that the U.S. economy has been in a recession for 12 months.
Letting the Big Three go belly-up right now would weaken an already-suffering economy.
â€œTo put that into the economy right now that is in recession I think would be very foolish,â€ said Harry Veryser, director of the graduate economics program at the University of Detroit-Mercy.
From 1978 to 2005, he ran one of the thousands of parts suppliers to Detroitâ€™s Big Three. He said that allowing any one of them to fail would be devastating to the other two.
â€œIf the suppliers lose a certain amount of business, those suppliers could go under because they would not be able to cover their overhead, and Ford would be in a difficult position to find other suppliers,â€ he said. â€œFrom an economic standpoint, I donâ€™t like the bailout either. However, politics is the art of the possible, and prudence is the chief virtue.â€
House Majority Leader Steny Hoyer, D-Md., warned that the money must be â€œa bridge loan to somewhere, to a future that has a viable auto industry.
â€œI think that there is clearly a consensus that having an automobile industry in this country that survives is absolutely essential to our security,â€ he said, but added, â€œI donâ€™t want to say what we will doâ€ until the plan has been thoroughly reviewed.
By Kevin G. Hall and David Lightman, McClatchy Tribune