Big 3 make fuel-efficient return

WASHINGTON — Humility was the order of the day Thursday as the chief executives of Detroit's automakers — arriving conspicuously in hybrid cars and promising to take salaries of $1 a year — returned to Capitol Hill to ask for up to $38 billion in federal loans.

General Motors Chief Executive Richard Wagoner said "We learned a lot" from last month's public-relations disaster, when the executives arrived in corporate jets demanding money but with no plan to change how they did business. This time all three had restructuring plans in hand.

In testimony before the Senate Banking Committee, Wagoner admitted mistakes in failing to build smaller, more fuel-efficient vehicles. Ford's president and chief executive, Alan Mulally, outlined how his company had slashed the number of brands, dealers and employees, invested in fuel-efficient technologies and refocused on consumers.

"It used to be that our approach to our customers was, if you build it they will come," Mulally said. "We produced more vehicles than our customers wanted and then slashed prices, hurting the residual values of those vehicles and hurting our customers."

Chrysler CEO Bob Nardelli promised his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would reimburse taxpayers by 2012 and would devote itself to manufacturing "fuel-efficient cars and trucks that people want to buy."

The Big Three executives appeared alongside Ron Gettelfinger, the United Auto Workers president, who backs federal help and pledged to keep negotiating with the companies. "We recognize that the current crisis may require all stakeholders, including the workers and retirees, to make further sacrifices," he said.

"A tall order"

After the six-hour hearing with the auto executives, Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, said he would try to assemble a plan to revive the automakers, asserting that "inaction is not an option." But he conceded that enacting any proposal to save the car companies would be "a tall order."

Instead of the vague request to the committee from two weeks ago, this time Wagoner asked for $12 billion in short-term loans, plus a $6 billion line of credit. He said GM needs $4 billion immediately and $4 billion more in January, and hopes to repay the government by 2012.

Nardelli said Chrysler needs a $7 billion bridge loan and immediate assistance for Chrysler Financial, the company's auto-financing arm, from the Treasury's financial-rescue program.

Mulally requested a $9 billion line of credit, which he said he hopes never to use. But Ford projects that its needs could grow to $13 billion if the economy continues to deteriorate.

Meanwhile, Democratic congressional leaders again urged the Bush administration to use its authority under the $700 billion financial-rescue program to forestall the auto industry's collapse. Dodd said Treasury Secretary Henry Paulson must explain why the car companies, which support one in 10 U.S. jobs, are less deserving of assistance than Wall Street banks and insurance companies.

"If the Federal Reserve and the Treasury Department, under President Bush, can find $30 billion for Bear Stearns, if they can concoct a $150 billion rescue for AIG, if they can commit $250 billion to Fannie Mae and Freddie Mac, and if they can back Citigroup to the tune of more than $300 billion, then there ought to be a way to come up with a far smaller dollar figure to protect this economy from the unintended consequences that would be unleashed by a collapse of the automobile industry," Dodd said.

Gene Dodaro, acting comptroller general of the Government Accountability Office, said the financial-rescue program is "worded broadly enough" to permit Paulson to help the automakers. Several Republicans on the panel agreed: Paulson "clearly has the authority under TARP to do this," said Sen. Bob Corker, R-Tenn., referring to the Troubled Asset Relief Program. "He could do it in five minutes."

Counting on the Energy Dept.

The automakers have applied for nearly $22 billion from an Energy Department loan program intended to promote development of fuel-efficient technology, bringing their total request to about $60 billion, Corker noted. He said the Bush administration has rejected those requests; a department spokeswoman said the agency has merely asked for more information.

In any case, all three companies crafted business plans that count on the Energy Department money to help them stay afloat over the next two years. The Bush administration has proposed redirecting that money to provide immediate liquidity. But Sen. Jon Tester, D-Mont., noted that idea "totally destroys the business plan."

Tester was one of several senators who said they didn't find the business plans convincing. Neither did Mark Zandi, chief economist at Moody's Economy.com, who testified that the auto giants are likely to need up to $125 billion "to avoid bankruptcy at some point in the next two years."

Zandi urged lawmakers nonetheless to give the car companies the money, because their "bankruptcy, at this point in time, would be cataclysmic" to the economy. But lawmakers should release the money in two installments, Zandi said, making clear that if the firms' restructuring is not successful, Washington will "work to ensure that there is an orderly bankruptcy process."

Zandi's was one of many ideas discussed at the hearing. Dodd and Sen. Charles Schumer, D-N.Y., promoted giving some money to a presidential designee who could sit down with the companies, their creditors, their suppliers and the UAW and hammer out a plan. Corker and Sen. Robert Bennett, R-Utah, discussed a forced merger of GM and Chrysler, which Bennett said could save up to $10 billion a year.

Sen. Richard Shelby, R-Ala., the committee's top Republican, questioned why last month the companies sought $25 billion but now want up to $38 billion, and was concerned the money would "prop up a failed business model for a few months."

Compiled from the San Francisco Chronicle, The Washington Post, McClatchy Newspapers and The Associated Press