Calls for auto exec changes along with rescue!

WASHINGTON (Reuters) - The ailing U.S. auto industry needs changes at the top, an influential Democratic senator said on Monday as Congress and the White House work to complete a plan to save Detroit's Big Three and stem the deepening U.S. recession.

Even if they manage to reach an agreement in principle to provide General Motors Corp, Chrysler LLC and Ford Motor Co with at least $15 billion in short-term loans, it was uncertain if it would become law.

Democrats have a majority in the 100-member Senate, which is to meet on Monday and could begin consideration of legislation within days. But skeptical Republicans could kill such a measure with a procedural hurdle that would need 60 votes to clear.

Democratic Sen. Christopher Dodd, the powerful chairman of the Senate Banking Committee, indicated that any bailout might come with strings attached for auto industry executives, who appeared before his committee last week to plead for help.

"It is not my job to hire and fire, but what I'm trying to suggest is that you need to have new teams in place," Dodd told ABC's Good Morning America show on Monday.

"If you are going to restructure a company you can't be asking the people frankly, many who were involved in creating the problems we're in, to be involved in restructuring."...More

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The Big Three Must Make Their Case For Loan

Automakers to make a clearer case for bailout
Congress is expecting executives to return with detailed business plans that answer three key questions.

By KENDRA MARR, Washington Post

In just nine days, Detroit's Big Three automakers hope to replead their case for a $25 billion emergency loan. But this time they will be expected to produce clearer business plans.

On Friday, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., sent the automakers a letter calling on them to submit "a credible restructuring plan" by Dec. 2. The letter comes after Congress refused to vote Thursday on carving the loan out of the $700 billion financial rescue plan.

President Bush, in his weekly address Saturday, castigated Democrats for failing to vote on an alternative proposal to let automakers instead tap $25 billion in loans that are supposed to help them improve the fuel efficiency of their cars.

"If the automakers are willing to make the hard decisions needed to become viable, they should be able to receive the funds Congress already allotted to them for other purposes," Bush said.

Pelosi and others have said there was not enough support in Congress to provide funding absent a detailed turnaround plan.

Pelosi and Reid laid out a number of requirements for a restructuring plan that would generally answer three questions:

1. How will the $25 billion be spent and paid back?

Automakers have said they intend to split the $25 billion loan roughly along the lines of their share of the U.S. market. GM would get $10 billion to $12 billion. Ford and Chrysler would take $7 billion to $8 billion each.

Asked how they intended to pay back the loan, Chrysler chief executive Robert Nardelli said the automakers hoped the money would buy them time to transform their businesses.

"We wouldn't be here today asking for this if we didn't have a high confidence level that we could weather this economic trough, continue to resize, make these gut-wrenching decisions to come out the other side leaner, more agile, and for us, a higher-quality, higher-reliable product," he said.

Yet some analysts said GM alone may need as much as $30 billion next year to deal with a potential cash shortfall. Pelosi and Reid are asking the automakers to document their current financial positions and outline plans for meeting health care and pension obligations. They want estimates for when the loans would be repaid under varying auto sales conditions.

Some analysts say the automakers also need to work on their marketing pitches, recalling the assertive spirit of former Chrysler chief executive Lee Iaccoca, who persuaded Congress to bail out Chrysler in 1979.

"He was much more a salesman," said Bruce Belzowski, an associate director at the University of Michigan's Transportation Research Institute. "When he went before Congress he was excited and emotional about what he was going to do. ...... What a great show for just a $1.5 billion loan."

2. How will the automakers demonstrate accountability?

Congress wants to see that the industry is willing to make sacrifices if it accepts government aid.

Some lawmakers cringed when Ford chief executive Alan Mulally refused to cut his salary to $1 like Iacocca, saying, "I think I'm OK where I am." And flying three separate private jets to Washington to testify enraged Rep. Gary Ackerman, D-N.Y.: "I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here? It could have at least sent a message that you do get it."

The United Auto Workers will likely need to make some "visible indication of sacrifice" to push forward the automakers' plans, said Dave Cole, chairman of the Center for Automotive Research.

Ford and GM made some headway on Friday, announcing cuts at several plants.

3. Is the industry viable?

This is perhaps the most important question for Congress.

GM chairman and chief executive Rick Wagoner attempted to convey a commitment to make cars more fuel efficient.

"We have 20 models that get more than 30 miles per gallon highway, more than twice any other manufacturer today," he said. "We have six hybrid models. We'll offer three more next year. We're the global leader in biofuel vehicles."

But lawmakers want further assurances. Pelosi and Reid asked automakers to demonstrate their ability to meet fuel standards of at least 35 miles per gallon by 2020.

Yet some analysts said GM alone may need as much as $30 billion next year to deal with a potential cash shortfall. Pelosi and Reid are asking the automakers to document their current financial positions and outline plans for meeting health care and pension obligations. They want estimates for when the loans would be repaid under varying auto sales conditions.

Some analysts say the automakers also need to work on their marketing pitches, recalling the assertive spirit of former Chrysler chief executive Lee Iaccoca, who persuaded Congress to bail out Chrysler in 1979.

"He was much more a salesman," said Bruce Belzowski, an associate director at the University of Michigan's Transportation Research Institute. "When he went before Congress he was excited and emotional about what he was going to do. ...... What a great show for just a $1.5 billion loan."

2. How will the automakers demonstrate accountability?

Congress wants to see that the industry is willing to make sacrifices if it accepts government aid.

Some lawmakers cringed when Ford chief executive Alan Mulally refused to cut his salary to $1 like Iacocca, saying, "I think I'm OK where I am." And flying three separate private jets to Washington to testify enraged Rep. Gary Ackerman, D-N.Y.: "I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here? It could have at least sent a message that you do get it."

The United Auto Workers will likely need to make some "visible indication of sacrifice" to push forward the automakers' plans, said Dave Cole, chairman of the Center for Automotive Research.

Ford and GM made some headway on Friday, announcing cuts at several plants.

3. Is the industry viable?

This is perhaps the most important question for Congress.

GM chairman and chief executive Rick Wagoner attempted to convey a commitment to make cars more fuel efficient.

"We have 20 models that get more than 30 miles per gallon highway, more than twice any other manufacturer today," he said. "We have six hybrid models. We'll offer three more next year. We're the global leader in biofuel vehicles."

But lawmakers want further assurances. Pelosi and Reid asked automakers to demonstrate their ability to meet fuel standards of at least 35 miles per gallon by 2020.

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The Big Three Plead to Congress For A Loan

WASHINGTON – Detroit's Big Three automakers pleaded with Congress Tuesday for a $25 billion lifeline to save their once-proud companies from collapse, warning of broader peril for the national economy as well.

It was an uphill battle, with the plan stalled on Capitol Hill amid opposition from Republicans and the Bush administration. But congressional leaders worked behind the scenes in an effort to hammer out a compromise that could speed some aid to the automakers before year's end.

The executives of Chrysler LLC, Ford Motor Co. and General Motors Corp., as well as the United Auto Workers union chief, were pleading their case Tuesday afternoon before the Senate Banking Committee. A House panel was to hear from them Wednesday.

Majority Leader Steny Hoyer said Congress might have to return in December — rather than adjourning for the year this week, as expected — to push through an auto bailout.

"Dealing with the automobile crisis is a pressing need. We are talking about a lot of people ... and a great consequence to our economy," said Hoyer, D-Md. "Obviously we are going to be back here, we think, in December."

The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.

In the Senate, leaders were focusing on a plan favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to tide them over financially until President-elect Barack Obama takes office.

However, House Speaker Nancy Pelosi, D-Calif., and other senior Democrats, who count environmental groups among their strongest supporters, have vehemently opposed that approach because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.

Instead, they want to draw a separate $25 billion for the industry from the $700 billion Wall Street bailout — bringing the government's total aid to the car companies to $50 billion.

A Senate vote on that plan, which would also extend jobless benefits, could come as early as Thursday, but aides in both parties and lobbyists tracking the effort privately acknowledge it doesn't have the support to advance. Treasury Secretary Henry Paulson renewed the administration's opposition on Tuesday.

Even the car companies' strongest supporters conceded Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape.

"While I believe we have to have retooling going into next year, if in the short run the only way we have to be able to get some immediate help is to take a portion of that, I would very reluctantly do that — but only because I believe President-elect Obama is going to be focused on retooling and on a manufacturing strategy next year," said Sen. Debbie Stabenow, D-Mich.

The White House said the government shouldn't send any more money to the struggling auto industry on top of the already-approved loans.

"We don't think that taxpayers should be asked to throw money at a company that can't prove that it has a long-term path for success," said White House Press Secretary Dana Perino.

Sen. Mitch McConnell, R-Ky., the minority leader, said that redirecting the existing loans was "a sound way to go forward," and that he was working with Democratic Leader Harry Reid of Nevada to set a vote on such a plan.

"The auto industry obviously is very important, very important to my state, but there is a way to do this," said McConnell, who has two Ford plants and a GM plant in his state.

Paulson, testifying on the House side, defended the administration's handling of the massive $700 billion bailout for the financial industry and said it should remain off-limits for Detroit, no matter how badly the automakers need help.
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Chrysler Only has enough money to last 6 months!

With the Internet a buzz on the massive automotive third quarter losses, Washington better act fast (if At All)

The American auto makers can not wait 12 months for the 25Billion set aside from the Federal Government for retooling plants to build energy efficient vehicles. If they have to wait a year, they won't make it!

Latest for Reuters-

Chrysler cash drains away as crisis deepens: sources

By Poornima Gupta and Kevin Krolicki

DETROIT (Reuters) - Chrysler LLC is rapidly burning through cash and being driven to prepare for a possible break-up if it can't clinch a merger with General Motors Corp or get government funding needed to ride out the economic crisis, people with knowledge of the situation said.

Without new funding or a wrenching restructuring, executives have raised concern about the auto maker's ability to finance its operations from existing cash beyond the first half of 2009, said the sources, who were not authorized to discuss Chrysler's performance.

Chrysler has had to pay out over $100 million a month to support strained suppliers on top of a total $200 million support to sales through dealers in August and September as it suspended vehicle lease financing, the sources said.
The $11.7 billion the struggling automaker said it had as of end-June has seen a substantial decline because of the company's deteriorating performance marked by a 35 percent slide in October sales and increasing cash incentives, they said.

Chrysler and its owner Cerberus Capital Management LP declined to comment.
Cerberus and GM had agreed last month on the broad terms of a merger of Chrysler's loss-making auto operations and those of its crosstown rival but the deal foundered when the Bush administration rebuffed a request for some $10 billion to support it, sources have said.
That setback has put the focus on winning support for a broader federal rescue package for GM, Chrysler, Ford Motor Co and their suppliers that the industry argues would save jobs and protect benefits for retirees.

But Chrysler has been forced to consider a more drastic set of backup plans that could include selling off key business lines -- including Jeep, considered its most valuable brand. It may also outsource its finance and human resources, sources said.
As a step toward that hard-landing scenario, the automaker is moving to split up its replacement parts business based on brand so that its Chrysler, Jeep and Dodge operations could be completely separate, one source briefed on that plan said.
That could make it easier to sell off an individual brand.
LOBBYING WASHINGTON
Chrysler Chief Executive Bob Nardelli joined GM CEO Rick Wagoner and Ford CEO Alan Mulally on Thursday in meetings with U.S. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reed.
The three automakers lobbied the Democratic lawmakers -- who increased their power in Tuesday's election that also saw Barack Obama elected president -- for up to $50 billion in federal aid, sources said.
The push for aid has been accompanied by increasingly dire warnings from industry executives and their political allies about the cost of inaction and the risk of a failure that would cost tens of thousands of manufacturing jobs....More

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Detroit seeks Congress aid on retiree health care

Ken Thomas / Associated Press

WASHINGTON -- The leaders of General Motors, Ford, Chrysler and the president of the United Auto Workers union came to Capitol Hill Thursday to discuss billions of dollars more in financial help for the companies, which have struggled under a weakened economy.

House Speaker Nancy Pelosi was meeting with the chief executives of Detroit's automakers to hear their expected plea for an additional $25 billion in federal loans for future health care payments for retirees.

Pelosi told reporters at the start of the meeting that they would discuss "how we can work together to go forward to ensure the viability of that important industry, looking out for the taxpayer and looking out for the worker."

The executives also plan to seek help in accessing money from the Treasury Department or the Federal Reserve.

Congress last month approved $25 billion in low-interest loans for domestic automakers and suppliers to retool plants to build fuel efficient vehicles. But congressional allies of the industry have said the money will not be available fast enough to help the companies.

U.S. auto sales declined to their lowest level in more than 17 years last month, prompting some auto executives to predict dire consequences if the economy doesn't improve. The companies are hoping Pelosi will include funding for the industry in an economic stimulus package if she decides to call the House back in for a lame-duck session.

Alan Reuther, the UAW's legislative director, said the executives and UAW president Ron Gettelfinger "will be making the case why additional assistance from the federal government is needed to help the companies through this severe economic credit crisis."

The Pelosi meeting with Chrysler CEO Bob Nardelli, Ford CEO Alan Mulally and GM Chairman and CEO Rick Wagoner comes at a precarious time for the industry. General Motors Corp. and Ford Motor Co. are expected to post dismal third-quarter results Friday that will show losses in the billions of dollars. Additional job cuts by both automakers also are expected Friday.

A top GM executive said Wednesday that the next 100 days will be critical for GM and the industry.

"We must be adaptable and ready to make needed changes quickly, particularly over the next 100 days," said Troy Clarke, GM's president for North America.

GM has been talking to Cerberus Capital Management LP, the majority owner of Chrysler LLC, about acquiring Chrysler. GM is reportedly seeking Chrysler's $11 billion in cash and federal aid to make the deal happen.

Auto industry officials said the companies do not intend to ask Pelosi for Congress' help in financing a merger. Gettelfinger has expressed concern that a GM acquisition of Chrysler would lead to massive job losses.

The new $25 billion in loans that the automakers want from Congress would help them make required payments to health care trust funds that were created as part of the 2007 labor deal.

Reuther said the companies are required to provide $15 billion to the fund in January 2010 and an additional $15 billion by 2012. He said the $25 billion from Congress would give the companies a better chance of immediately lining up other financing because most of the health care trust fund payments would have been covered.

"It's very important that those monies be contributed so retirees continue to have health care," he said. "The financial community is looking at that liability, and it's a major factor in their willingness to provide loans to the companies."

The executives and Gettelfinger also want help from Congress in winning access to the $700 billion financial bailout being run by the Treasury Department and to low-rate emergency borrowing from the Federal Reserve's discount window, used in normal times by banks.

President-elect Obama expressed support for an additional $25 billion in loans on the condition that the money would go toward helping the industry build fuel efficient cars. Obama has said he would meet with industry leaders and the UAW quickly to talk about helping automakers, but a meeting has not yet been scheduled.



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