WASHINGTON, December 4 – The Big Three US carmakers were to return to Congress on Thursday to renew their plea for a massive 34-billion dollar government bailout to save their vital industry from collapse.
An estimated three million jobs and a potential crash of the US economy are at stake as General Motors and Chrysler warn that they could run out of cash within a matter of weeks if they are not given access to billions in low-cost, government-backed loans.
Neither automaker expects they would be able to survive if they were forced into bankruptcy protection and the ripple effects of their failure would be felt across the country as auto supplies and related companies collapse in the wake of a sudden loss of business.
Ford said it might pull through on its own and return to profitability by 2011, but asked for a nine billion dollar line of credit in case the economy worsens or one of its competitors fails.
GM asked for four billion dollars this month and another 14 billion next year and Chrysler said it needed seven billion by December 31 if they were to survive a perfect storm of a global credit crisis, falling demand for large vehicles and a global economic slump.
The fate of the key auto industry is shaping up to be the first major test of the incoming administration of president-elect Barack Obama, who has warned he is not prepared to write the companies a blank check.
Obama said he wanted to hear what the automakers had to say at congressional hearings on Thursday and Friday before committing himself to any bailout.
"We should maintain a viable auto industry," he told a press conference Wednesday.
"But we should also make sure that any government assistance … is based on realistic assessments of what the auto market is going to be and a realistic plan for how we\’re going to make these companies viable over the long term."
The current White House said it was reviewing the three different plans and was open to a possible aid package, but cautioned not to expect any decisions in the coming days.
"I\’m not ruling anything in or out," spokeswoman Dana Perino said.
Michigan senator Carl Levin was hopeful that a deal would be reached, telling the Detroit News that the restructuring plans presented Tuesday were getting good reviews on Capitol Hill and that Senate leaders understand the urgency of acting quickly.
"I think the reception on the plans has been good. I think people realize the plans are comprehensive and serious," Levin said Wednesday. "They see the amount of restructuring, the amount of pain that is out there."
Lawmakers turned the three chief executives away empty-handed last month and charged them with coming up with proper plans showing they would be able to repay the loans and attain long-term viability.
They were roundly criticized for letting their iconic brands crumble in the face of competition from foreign transplants, whose US plants operate at much lower costs, and failing to develop smaller fuel-efficient cars.
There was also anger that all three had flown to Washington for the hearings in separate corporate jets — more proof of the excesses of the CEO lifestyle.
The automakers tried to reshape their image with several symbolic concessions.
Ford and GM will get rid of their company airplanes and all three chief executives will work for salaries of one dollar a year. They also drove to Washington in hybrid vehicles.
All three put forward plans to invest billions in advanced technology, shift their product mix towards more environmentally friendly vehicles and slash operating costs.
GM, which is considered to be at the greatest risk of collapse, offered the most radical plan Tuesday.
It said it will reduce its US workforce by nearly a third from the current level of 96,537 people to between 65,000 and 75,000 salaried and unionized workers by 2012 and cut the number of US plants from 47 in 2008 to 38 in 2012.
Auto workers also offered to share in the sacrifice, despite landmark concessions made last year which have taken billions of dollars in health care liability off the books of the Big Three and will bring labor costs in line with the non-unionized US plants of foreign rivals by 2012.
United Auto Workers (UAW) president Ron Gettelfinger said Wednesday the union was "willing to take an extra step to move this along" by negotiating modifications to the union\’s contract and delaying billions in payments to a health care fund.
Industry data out Tuesday showed US auto sales dropped 37 percent last month, as total US sales fell to 746,789 from nearly 1.2 million vehicles in November 2007.