Article published December 03, 2008
Chrysler exec: failure could spark depression
ASSOCIATED PRESS
WASHINGTON — A top executive of Chrysler LLC cautioned Wednesday that a carmaker collapse could send the economy spiraling into a depression, as the United Auto Workers union braced for contract concessions.
Jim Press, Chrysler's vice chairman, said the U.S. automakers were "down to months left," as industry officials ratcheted up a fierce lobbying push to persuade Congress to approve as much as $34 billion in emergency aid.
"We're on the brink with the U.S. auto manufacturing industry," Press told The Associated Press in an interview. "If we have a catastrophic failure of one of these car companies, in this tender environment for the economy, it's a huge blow. It could trigger a depression."
Fritz Henderson, president and chief operating officer of General Motors Corp., took to the TV airwaves to stress that bankruptcy isn't a viable option on the eve of a new set of congressional hearings on the auto bailout. At the same time, UAW leaders were immersed in intense discussions on possible givebacks for the companies at an emergency meeting in Detroit.
Under consideration were the possibility of scrapping a much-maligned jobs bank in which laid-off workers keep receiving most of their pay and postponing the automakers' payments into a multibillion-dollar union-administered health care fund.
Henderson told NBC's "Today" that choosing the bankruptcy route would further erode consumer confidence in the automaker and "we want them to be confident in their ability to buy our cars and trucks."
Chrysler, GM , and Ford Motor Co. have ditched their corporate jets for hybrid cars and replaced vague pleas for federal help with detailed requests for their second crack at persuading Congress to throw them a lifeline.
Congressional leaders are reviewing three separate survival plans from the automakers in preparation for hearings Thursday and Friday, as they weigh whether to call lawmakers back to Washington for a special session next week to vote on an auto bailout.
Officials at the White House and the Treasury and Commerce departments are also scouring the automakers' plans. White House press secretary Dana Perino said it is "too early to say" whether the companies have outlined a path toward viability that justifies new federal assistance.
"It sounds to me like the companies have given this a lot of thought and are willing to make some tough decisions," Perino said. "We just need a little more time to pore through the documents.'"
She said the administration also is waiting to see how lawmakers react to the automakers' testimony this week, and what sort of support their bailout requests generate.
"That remains a little bit of a mystery," Perino said. "It is really important to see what kind of support they can get on Capitol Hill."
Henderson acknowledged Wednesday that the initial appearances by the heads of the car makers was a public relations failure.
"Yeah, it certainly was not our finest hour," he told NBC. "We were not as clear about what we wanted to do." He also conceded that the decision by the executives to travel to Washington by private jet "was a problem" for lawmakers.
In blueprints delivered to Capitol Hill on Tuesday, GM and Chrysler said they needed an immediate infusion of government cash to last until New Year's, and both said they could drag the entire industry down if they fail. Ford is requesting a $9 billion "standby line of credit" that it says it doesn't expect to use unless one of the other Big Three goes belly up.
But Chrysler said it needed $7 billion by year's end just to keep running. And GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit it might need if economic conditions worsen. The two painted the direst portraits to date — including the prospects of shuttered factories and massive job losses — of what could happen if Congress doesn't quickly step in.
Democratic leaders voiced concern and a desire to do something to avert an automaker collapse, but they made no commitments about helping an industry that's made few friends lately on Capitol Hill.
President-elect Barack Obama said it appeared that Big Three chiefs are coming back to Congress with a "more serious set of plans" for how their companies are going to survive. But he reserved comment until he sees what the automakers propose during hearings Thursday and Friday.
House Speaker Nancy Pelosi, D-Calif., has said she hopes Congress acts to help the automakers. Senate Majority Leader Harry Reid, D-Nev., said he would advance a bill Monday in preparation for a possible auto bailout vote later in the week.
Determined to burnish their badly tattered images, Ford CEO Alan Mulally, GM CEO Rick Wagoner and Chrysler chief Bob Nardelli, road-tripped the 520 miles from Detroit to Washington in fuel-efficient hybrid cars for this week's hearings.
Mulally and Wagoner both said they'd work for $1 a year — something Chrysler's plan said Nardelli already does — if their firms took any government loan money. Ford offered to cancel management bonuses and salaried employees' merit raises next year, and GM said it would slash top executives' pay. Ford and GM both said they would sell their corporate aircraft.
All three plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.
Nevertheless, Sen. Arlen Specter, R-Pa., said the mood in Congress "candidly is not supportive" of the automakers, although he called the consequences of just one of them failing "cataclysmic."
Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said the automakers still need to prove they can survive and be profitable. "If these companies are asking for taxpayer dollars, they must convince Congress that they are going to shape up and change their ways," Dodd said in a statement.
His panel is to hear testimony Thursday from the auto executives, UAW chief Ron Gettelfinger, and the head of the Government Accountability Office on the companies' plans.
The House Financial Services Committee is to hold a similar session on Friday.
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