The fate of Detroit’s Big Three – Chrysler LLC, Ford Motor Company and General Motors – essentially rides on today’s Congressional hearings. After presenting their proposals earlier this week, which called for up to $34 billion in low-interest loans in exchange for CEO salary cuts, restructuring and ditching of corporate perks, the automakers’ CEOs will attempt to persuade lawmakers to approve the loans.
Watch this space for live updates as the story develops. The hearings begin at 10:00 a.m. Eastern
3:44 p.m.
With the hearing now adjourned, Dodd said that Congress will consider the low-interest loan for the next 24-48 hours.
Congressman Evan Bayh, an Indiana Democrat, told reporters that he questioned whether a decision could be reached in the next week.
“Can it be done in the next week? It’s a tough lift,” he said. Congress might consider a plan to keep the companies alive for the rest of the year until a final decision was made.
Republican Sentaor Robert Bennett of Utah encouraged a merger between General Motors and Chrysler , saying that it would reduce the manufacturers’ costs and provide an infusion of capital.
“I don’t think you need any more loans,” Bennett said. “What you need is more capital.”
Bennett argued that the automakers don’t need interest-bearing loans.
Nardelli, however, was less keen on the idea of a merger. He did agree that it would save Chrysler and GM between $8 and $10 billion every year, but he argued that the job losses would have to be substantial.
“The first job to go would be mine,” Nardelli said, though he added that if that was a requirement for getting the loans for Chrysler, he would agree to leaving his post.
A common theme among the debates has been gutting the automakers of their current management – the management that, it seems, the public thinks got the automakers in their current situation, a surprise given that Mulally and Nardelli are new to the auto industry.
2:31 p.m.
Democrat congressman Jon Tester from Montana stated that he doesn’t want the automakers to invest the proposed low-interest loans in manufacturing facilities outside of the United States.
2:02 p.m.
Ron Gettelfinger said that by the end of December, GM could be gone.
Nardelli asked Congress to set a date by which the automakers must show they are making progress; the date that seemed to be agreed upon was March 31, 2009.
All three CEOs confirmed earlier in the hour that they had arrived in Washington via hybrid versions of their products.
12:52 p.m.
Chrysler, which is asking only for a $7 billion infusion of cash, unlike General Motors and Ford which want continued support, came under fire from Senator Dodd.
“Are we merely providing money because of a business decision that was made?” Dodd asked Chrysler CEO Bob Nardelli. He continued to ask if Congress was “pumping $7 billion into the company” before it is sold.
12:20 p.m.
The CEOs have taken the stage. GM’s Rick Wagoner asked for $4 billion in loans in December and another $4 billion in January in order to accelerate “the restructuring we’ve been undergoing for several years” and to “radically [expand] on those moves.â€
UAW President Ron Gettelfinger stressed that a bankruptcy would not allow the automakers to survive.
“Research has indicated that customers will not buy vehicles from a company in bankruptcy,†he said.
He also defended the UAW, which has agreed to new restrictions and concessions. He said that UAW “wages and benefits only make up 10% of the cost.â€
11:09 a.m.
“Nobody is going to buy a car from a bankrupt company,” said Democrat Senator Charles Schumer of New York.
“I don’t trust the car companies’ leadership,” he continued.
11:06 a.m.
As the debate continues – with comparisons being drawn to the Chrysler bailout of the 1980s – news comes that Senator Chris Dodd would support the loans. He said that letting the automakers slip into bankruptcy would be like playing “Russian roulette with the entire economy of the United States.â€
General Accounting Office acting comptroller Gene Dodaro told the hearing that the GAO recommends a board with strong authority to oversee the use of the federal loans if Congress provides them to the automakers. He recommends that Congress require the companies to provide collateral in exchange for the loans.
10:50 a.m.
After giving their prepared opening remarks, the three CEOs have been met by strong initial skepticism by the Senate Banking Committe.
GM CEO Rick Wagoner admitted that the automakers are in Congress “because we made mistakes.”
Chrysler CEO Bob Nardelli, who arrived in Washington in an electric Jeep Wrangler , said that he has “never attended a more important session where more is reliant upon both the House and the Senate.”
And Ford CEO Alan Mulally, whose company is struggling but isn’t on the verge of collapse like GM and Chrysler, said, “Our plan is working, but there is clearly more to do—something that is increasingly difficult in this tough economic climate.”
9:20 a.m.
Rumors the morning of the hearings indicate that Senators are eager to push the matter to the Federal Reserve, rather than having the Senate Banking Committee make the decision.
Democrat Chris Dodd of Connecticut wrote yesterday to Federal Reserve Chairman Ben Bernanke to ask him if there was anything stopping him from using his lending authority to provide the loans to the automakers, reports the Associated Press.
Senate Majority Leader Harry Reid, D-Nev., said he thinks Congress doesn’t have the votes to rescue the Big Three. He said it was up to the Bush Administration to dole out the $34 billion from the $700 billion already doled out to Wall Street.
General Motors and Chrysler are considering a pre-arranged bankruptcy, Bloomberg reports. It’s a last-ditch effort that, according to analysts, shows the desperation of the situation. Recovering from bankruptcy would be difficult since shoppers might not continue to purchase GM and Chrysler cars until the automakers recover – but recovery hinges on increased sales.
