The heads of the Big Three automakers pleaded Tuesday for emergency government aid to stave off potential collapse, but after four hours of testimony, it appeared they had not persuaded enough lawmakers to move quickly on a bailout.
Senate Democratic leaders said they had not been able to muster the support for legislation that would provide $25 billion to the troubled industry from the Treasury Department's $700 billion economic rescue fund.
Detroit's bid for help was laid bare at a Senate Banking Committee hearing, where two of the three automakers said they might run out of money by the end of the year.
The cause of their misfortunes was not management mistakes, they said, but the weak economy and the inability of consumers to obtain credit to buy cars.
The chief executives of General Motors and Chrysler said their companies were using up their cash at a rate that could leave them close to insolvency without federal aid.
“Without immediate bridge financing support, Chrysler's liquidity could fall below the level necessary to sustain operations,” said Chrysler Chairman Robert Nardelli.
His comments were echoed by GM Chairman Rick Wagoner, who warned that the rippling impact of the industry's cash woes could put 3million American jobs at risk. He said a failure by GM, Ford or Chrysler would rapidly bring the entire domestic industry down.
“The societal costs would be catastrophic – 3 million jobs lost within the first year, U.S. personal income reduced by $150 billion and a government tax loss of more than $156 billion over three years,” Wagoner said.
Despite the urgent tone, lawmakers in both parties saw little chance that a bailout could be put together and passed during the current lame-duck session. The Bush administration has steadfastly refused requests by Democratic leaders to tap into the rescue program for the automakers.
Treasury Secretary Henry Paulson, at a House hearing earlier in the day, implored lawmakers to oppose using any of the $700 billion financial bailout for the auto companies, which he said would set a dangerous precedent.
“There are other ways” to help them, he said.
At the same time, he testified, “I think it would be not a good thing, it would be something to be avoided, having one of the auto companies fail, particularly during this period of time.”
The White House instead has pushed for the auto companies to get immediate access to $25 billion in previously approved loans to retool production plants to make fuel-efficient vehicles.
Sen. Carl Levin, D-Mich., a chief auto industry ally, said he remained hopeful of a deal. He said a consensus had emerged among leaders in both parties and at the White House on providing $25 billion in so-called bridge loans as a lifeline for the companies.
But even Levin conceded that hammering out the details was difficult. “Progress? No,” he said when asked where things stood on Tuesday, but added that efforts were being made.
With so much rancor on Capitol Hill, lawmakers from states with some of the biggest stakes in the industry were angling to come to the rescue.
Sen. George Voinovich, R-Ohio, and Sen. Kit Bond, R-Mo., said they were drafting a compromise measure that would speed access to the $25 billion in loan guarantees.
“Serious people are taking a serious approach to a compromise that can actually become law,” said Don Stewart, a spokesman for the Republican leader, Sen. Mitch McConnell of Kentucky.
Levin said lawmakers were considering several approaches, including rewriting the provision mandating that any subsidized loans go toward retooling plants to produce advanced fuel-efficient cars.
Levin also noted that President-elect Obama had called for $50 billion in aid during the campaign, and that perhaps $25 billion could be provided now, with another $25 billion to be put forward by the new administration next year.
The suddenness of GM's cash crisis has caught Washington by surprise and raised doubts that the largest American automaker can survive long term.
Sen. Richard Shelby of Alabama, the ranking Republican on the banking committee, said he was skeptical that the Detroit companies could sufficiently reorganize their operations and improve their competitiveness.
“How is this money going to be used?” he said. “Will it be used to improve their business model and product lines, or is this just life support?”
The hearing underscored how deeply complicated the problems are at the Big Three, which have been losing billions even as they close factories and cut tens of thousands of jobs.
It also stirred fresh criticisms of Detroit's ability to compete in the global marketplace.
Several senators called into question the carmakers' vehicle quality, high labor costs and the capability of their senior management.
But the executives argued that their turnaround strategies were taking hold just as the economy faltered and available credit dried up for consumers.