US car giants to ask Congress for loans

Top executives of the big three American carmakers will ask the US Congress for more than $34bn (€26.1bn) in loans today as two of them battle to survive beyond the end of the month.

Top executives of the big three American carmakers will ask the US Congress for more than $34bn (€27bn) in loans today as two of them battle to survive beyond the end of the month.

General Motors (GM), Chrysler and Ford will appear before congressional committees today and tomorrow to ask for $34bn of federal assistance after both GM and Chrysler said they were perilously low on cash.

The so-called big three submitted separate revised plans for their survival yesterday in a bid to convince the panels to call members of the US Congress back to Washington for a special session to vote on the car industry bail-out next week.

It is the second time that the senior executives will face the hearings after they failed to convince a sceptical Congress that they were worthy of the loans last month.

Yesterday, Fritz Henderson, GM’s president and chief operating officer, admitted that their first attempt was a public relations’ disaster.

“Yeah, it certainly was not our finest hour,” he told NBC.

“We were not as clear about what we wanted to do.”

He also conceded that the decision by the executives to travel to Washington by private jet “was a problem”. None of the three will use their expensive corporate jets to travel to today’s hearings, their spokesmen said.

US President-elect Barack Obama welcomed the carmakers plans, but he said he would wait until after the hearings to comment further.

“Congress was right to say the American taxpayers expect and deserve better than that,” Mr Obama said, referring to the carmakers’ original hearing.

He added that the new plans appeared to be more complete.

“We should maintain a viable auto industry, but we should also be sure any government assistance provided is based on a realistic assessment of where the industry is going to be,” he said.

White House press secretary Dana Perino said it was “too early to say” whether the companies had outlined a path toward viability that justifies federal assistance.

“It sounds to me like the companies have given this a lot of thought and are willing to make some tough decisions,” Ms Perino said.

“We just need a little more time to pore through the documents.”

She said the administration was also waiting to see how US politicians reacted to the executives’ testimony this week, and what sort of support their bailout requests generated.

“That remains a little bit of a mystery,” Ms Perino said.

“It is really important to see what kind of support they can get on Capitol Hill.”

On Tuesday, the big three delivered their plans to Capitol Hill and bluntly laid out their future prospects.

Both GM and Chrysler said they needed an immediate infusion of cash in order to last until the end of the year.

Chrysler said it would need $7bn (€5.5bn) by the end of the year just to keep running, and GM asked for $4bn (€3.1bn) immediately as the first instalment of a $12bn (€9.5bn) loan.

GM also asked for a $6bn (€7.7bn) line of credit to help it survive if economic conditions get worse.

Ford asked for $9bn (€7.1bn) as a “standby line of credit”, but said it would not need it unless one of the other big three collapsed, denting confidence in the market even further.

Earlier this week, figures showed industry-wide sales plunged in November by 35%, compared with the same month in 2007.

GM’s sales dropped 41%, Ford’s fell 30% and Toyota Motor Corp was down 34%.

The big three have warned that bankruptcy could cost millions of jobs and insisted their recoveries, which primarily involve a shift to more fuel-efficient vehicles, had been well under way before the financial crisis struck.

Yesterday, both GM and Chrysler said the US would face the prospect of shuttered factories and millions of job losses unless the Congress acted quickly.

Ford chief executive officer Alan Mulally and GM chief executive officer Rick Wagoner both said they would work for one dollar (68p) per year, something Chrysler chief Bob Nardelli already does, if their firms took any government loan money.

Ford also offered to cancel management bonuses and salaried employees’ merit raises next year, and GM said it would slash top executives’ pay. Both said they would sell their corporate aircraft.

All three plans envision the government getting a stake in the car companies that would allow taxpayers to share in future gains if they recover.

House Speaker Nancy Pelosi, a Democrat, said it was her “hope” that the US Congress would pass legislation to help the carmakers, but Republican senator Arlen Specter, for Pennsylvania, said the mood in Congress “candidly is not supportive” of the carmakers.

But Mr Specter added that the consequences of just one of the firms failing would be “cataclysmic”.

Senator Chris Dodd, chairman of the Senate Banking Committee which will hear from the executives today, said the carmakers still needed to prove they could survive and become profitable.

“If these companies are asking for taxpayer dollars, they must convince Congress that they are going to shape up and change their ways,” he said.

His panel will also hear from United Auto Workers union chief Ron Gettelfinger and the head of the Government Accountability Office on the companies’ plans today.

Tomorrow, the House Financial Services Committee will hold a similar session.