Lawmakers to grill US automakers
Lawmakers plan to question chief executives of stricken US automakers on their pleas for an industry bailout, while the Bush administration responded coolly to an aid plan being shaped by Democrats.world Updated: Nov 13, 2008 11:26 IST
Lawmakers plan to question chief executives of stricken US automakers on their pleas for an industry bailout, while the Bush administration responded coolly on Wednesday to an aid plan being shaped by Democrats.
Administration officials and some lawmakers expressed concern about industry viability, considering the automakers are churning through cash and have a poor near-term outlook. One Democrat, New York Sen. Charles Schumer, wants assurances Detroit will not seek yet more money in six months.
Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, said he would hold a hearing Nov. 19 on legislation to extend up to $25 billion to General Motors Corp, Ford Motor Co, and Chrysler LLC.
The domestic auto giants have sought emergency assistance to help them survive a steep and worsening drop in auto sales that they blame on the global credit crisis and slumping economy.
GM has said it could run out of cash by early next year.
Frank's committee expects to hear from CEOs Rick Wagoner of GM, Alan Mulally of Ford and Bob Nardelli of Chrysler.
United Auto Workers President Ron Gettelfinger will also testify before Frank's panel next week, a union official said.
The four men lobbied House and Senate Democratic leaders last week on the need for a rescue.
GM U.S. sales chief Mark LaNeve told dealers in a letter obtained by Reuters on Wednesday that the cost of allowing an industry collapse would be "catastrophic" in job losses, personal income reduction and reduced tax revenues.
"This level of economic devastation far exceeds the $25 billion of government support that our industry needs to bridge this current period," LaNeve said.
GM appealed to dealers and employees to lobby for help.
Auto companies employee nearly 250,000 people in the United States and account for four million more jobs in related industries and indirectly.
With potential bailout cash on the horizon, investors sent Ford shares 2.2 per cent higher to $1.84 on Wednesday, while GM jumped 5.5 per cent to $3.08. Both trade on New York Stock Exchange. Chrysler is privately held by Cerberus Capital Management LP.
House Speaker Nancy Pelosi directed Frank on Tuesday to draft legislation to help Detroit via the US Treasury Department's $700 billion corporate bailout fund.
Pelosi said Frank should include restrictions on executive compensation and add other "taxpayer protections." Key Democrats are also pressing for the government to take an equity stake in the industry in exchange for aid.
Frank is expected to produce a bill in coming days, which would allow the companies and other lawmakers to review it before the hearing.
Steve Adamske, a spokesman for the Financial Services panel, said the hearing "will allow the companies to come in and present a case" on why the bailout "is necessary and what's at stake."
Adamske said the panel will want to know, in part, how any bailout money would be spent.
Congress is set to return for a brief post-election session next week. While Pelosi expressed confidence in passing a bailout, Senate Majority Leader Harry Reid has said any rescue would depend on the mood of Republicans in the Senate and the White House.
Treasury Secretary Henry Paulson skirted questions on Wednesday about whether he would support extending the bailout program to manufacturing.
The White House did not commit to Pelosi's plan and Paulson said the intent of the bailout fund was to "deal with the financial industry."
Administration officials, instead, continued to press for Congress to consider amending a law that created a $25 billion loan program in September to help automakers retool factories for making more fuel efficient cars. Industry and congressional Democrats do not favor that course.
White House spokeswoman Dana Perino said the administration would wait to see what Congress produced on aid, but she stressed the retooling loans program "very wisely" requires that public funds only go to companies that are viable.
"I think everyone can agree that you wouldn't want taxpayer dollars going to something that would not be a long time concern," Perino said.
Paulson stressed the importance of the auto industry to overall manufacturing, but added at a news conference that any government remedy for Detroit's problems "has got to be a solution leading to long-term viability."
Schumer, chairman of Congress' Joint Economic Committee, said he was not opposed to using money from the bailout program to rescue Detroit. But he said conditions should include assurances the rescue would not be a short-term solution.