Updated from 2:47 p.m. EST
Democratic leaders want the Big Three automakers to come back next month with a better explanation of how a Congressional bailout could save their companies.
Senate Majority Leader Harry Reid, D-Nev., said Thursday he will ask the CEOs of
, who spoke on Capitol Hill this week in a bid to get a $25 billion aid package, to return to Washington the week of Dec. 2 to provide additional testimony.
Reid said more hearings are required because neither Congress nor the American people were convinced by their recent comments. Getting a bill through Congress at this point would be impossible, given the current lack of support, he said.
"We want them to come up with a proposal that we can get through here on Dec. 8," Reid said at a press conference. "We don't know how much they need for the so-called bailout. It's been very elusive as to what that is.
"We're kicking the can down the road because that will give us the opportunity to do something later," he said. "What kind of a message do we send to the American people by having a bunch of failed votes?"
House Speaker Nancy Pelosi, D-Calif., said that last week, the companies indicated they wanted to visit Washington to discuss the idea of mergers, and she approved. But that was off the table when they arrived.
"It is essential that we see some restructuring, some path to viability for the industry," she said. "We reject those who are advocating bankruptcy for the industry."
Reid said Congress was hoping to help the auto group, but he added that legislators expect the carmakers to "get their act together."
He and Pelosi were joined by other Senators and members of the House of Representatives at the gathering. Pelosi stressed that while lawmakers want to save the sector, until the manufacturers produce a plan, "we cannot show them the money."
When the chief executives of GM, Ford and Chrysler appeared in the nation's capital earlier this week, they had a compelling story to tell. The story goes like this. In 2007, the automakers signed groundbreaking contracts with the United Auto Workers, enabling them to reduce costs to competitive levels, partially by transferring crippling health-care costs to a union-managed trust fund. They have also been downsizing furiously and are making better, more fuel-efficient cars.
In October last year, after GM signed its contract, its shares reached a three-year high of $43.20, reflecting improved prospects. In the first quarter of 2008, Ford reported a profit of $100 million, or $525 million excluding items. In the first six months of 2008, privately held Chrysler reported earnings before interest, taxes, depreciation and amortization of $1.1 billion.
Then the economy collapsed, dragging the automakers down with it, as credit dried up and consumers stopped buying. That was hardly the fault of the automakers.
"Normally, loans are sold in the secondary market," Chrysler CEO Robert Nardelli told the House Financial Services Committee on Wednesday. "Today, there is no secondary market and virtually no way to raise capital."
"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest level since World War II," added GM CEO Rick Wagoner. The comparison assumes sales are adjusted for population growth.
Ford, in particular, appears to have been on the road to recovery. At the Senate Banking Committee hearing on Tuesday, Ford CEO Alan Mullaly proclaimed: "We'll come out on the other side, and we'll be a turbo machine."
The profitable first quarter shows that Ford was "well on our way to sustainable credibility before the current economy and credit crisis stopped us cold," Mullaly told elected officials. "With the new
UAW agreement, we can make cars, trucks and utility vehicles in the U.S. and we can do it profitably."
In two cases, participants ranked the automakers in terms of their outlooks. Sen. Bob Corker, R-Tenn., said: "My sense is Ford has done a better job, GM has made some changes and is spiraling downward and Chrysler barely has a heartbeat." Corker also requested a ranking from UAW president Ron Gettelfinger, who responded: Ford, Chrysler, GM.
Despite the promise of a better future and the emotional appeal of an industry that helped to create the middle class, the three CEOs did not always make the best possible impression during two hearings. In one case, they were excoriated for eschewing commercial air service and taking private jets to Washington.
In another, they were reluctant to tell Congress how much of the $25 billion bailout each company would get, claiming, unimaginably, that the
Securities and Exchange Commission
prohibited it. The numbers, eventually pried out of the executives, were $7 billion for Chrysler, $7 billion to $8 billion for Ford and $10 billion to $12 billion for GM.
"I do ask why are we talking about all three companies being treated the same way," said Corker, who suggested the $25 billion grand total "was sort of thrown up there on the wall and it stuck," enabling the companies to divvy it up.
The bailout debate morphed into the typical partisan Washington battle, with Republicans opposed and Democrats in favor, arguably as payback for the UAW's political support.
In truth, however, the split also reflects the conflicted mindset of the U.S. overall. "The American public is really all over the board on this," said Rep. Shelley Moore Capito, R-W. Va. The uncertainty is understandable. While nobody wants it to fail, the U.S. auto industry is famous for not seeing what others see, such as its long resistance to seeking fuel efficiencies or paying market wages.
But the question became has the current crisis finally forced this dinosaur of an industry to evolve? And if so, why force these companies into bankruptcy?
worked wonders for the airlines, making far stronger companies of carriers such as
But Chapter 11 provides an imperfect remedy. It diverts management attention and inevitably leads to angst over huge legal fees, enraging the public even more than cushy UAW contracts do.
"I am struck that bankruptcy has become the new spectator sport," said Financial Services Committee chairman Rep. Barney Frank, D-Mass, this week. "People are prepared to watch other people go through it."