Stark reality for Detroit Three

They’ve changed tactics, but the auto makers’ humbled CEOs face numerous challenges in their second pitch for government cash ~ BARRIE MCKENNA

From Friday’s Globe and Mail December 5, 2008 at 8:50 AM EST

WASHINGTON - They traded in their private jets for politically correct hybrid cars. They toned down their warnings of economic cataclysm. And they seemed willing to make big concessions.

But the chastened chief executive officers of the Detroit Three auto makers could not escape the stark reality that a bailout is still far from a sure thing as they make their second pilgrimage to Washington in two weeks in search of government cash.

With bailout fatigue setting in and Americans deeply skeptical, auto makers face an uphill climb securing the $34-billion (U.S.) in loans they say they need to survive.

Top Republicans openly warned yesterday that they will deny the request as the CEOs testified before the Senate banking committee. And even Democratic leaders, who support the bailout, acknowledged substantial rank-and-file dissent to rescuing yet another troubled industry.

Sixty-one per cent of Americans are opposed to a bailout, according to a CNN/Opinion Research Corp. poll, conducted this week and released yesterday.

Yesterday’s hearing was briefly interrupted by a handful of protesters chanting, "The bailout is a sellout."

The CEOs of General Motors Corp., Ford Motor Co. and Chrysler LLC return to Capitol Hill today for a second day of hearings in the House of Representatives.

Adding to the auto makers’ challenge, Congress is poised to adjourn within days until January, when a new Congress and administration takes over. A pitched political battle over the loans could doom the bailout until the New Year.

"Asking Congress to craft something in 48 hours is challenging, to put it mildly," Democrat Christopher Dodd, chairman of the Senate banking committee, acknowledged five hours into the hearing.

The Democrats want the U.S. Federal Reserve Board or the Treasury Department to unilaterally tap existing funding sources, including the $700-billion bank rescue fund, to provide temporary relief until the new Congress and administration take over.

"We’re not going to leave town without trying, but I’m not a miracle worker," said Mr. Dodd, who faulted the administration of George W. Bush for resisting the auto makers’ demands.

Richard Shelby, the ranking Republican on the committee, was even blunter. "I intend to oppose bailing out the Big Three auto manufacturers," Mr. Shelby said, even before the executives took their seats.

Republican Bob Corker of Tennessee, like many Southern law makers whose states are home to foreign assembly plants, was openly suspicious of the Detroit auto makers’ vows to make better and greener cars at a profit if they can avoid bankruptcy. He accused Cerberus Capital Management LP, the private equity firm that controls Chrysler, of seeking a bridge loan so the car maker can survive long enough to find a buyer.

Mr. Corker added that unionized auto workers won’t agree to further painful wage and benefit cuts unless the companies face bankruptcy. "You have this problem that won’t be solved unless it’s forced to be solved," he said.

Yesterday’s testimony was in marked contrast to a hearing last month, when the executives flew to Washington, each in their own jet, threatening economic Armageddon if Congress didn’t write them a virtual blank check.

The auto makers have since submitted detailed restructuring plans that would see all three companies rationalize their plants, work forces, brands and dealers.

GM chief executive officer Rick Wagoner acknowledged the company has made mistakes. And all three companies agreed to go about their restructuring under the direction of a federal oversight board with the power to impose tough conditions in return for loans - similar to a model that guided Chrysler through a federal bailout in 1979-80.

Mr. Wagoner, along with Chrysler CEO Robert Nardelli and Ford CEO Alan Mulally, agreed the government board should have the power to force unions, suppliers, dealers and lenders to make concessions. GM and Chrysler, the most vulnerable of the Detroit Three, said Congress should make the loans now and then impose a March 31 deadline for showing their plans are working before any additional money is given.