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More trouble for auto bailout
The top Republican on the House Financial Services Committee said he's opposed to a $25 billion loan package for the Big Three.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: November 19, 2008: 12:38 PM ET
NEW YORK (CNNMoney.com) -- Auto industry executives were back on Capitol Hill Wednesday morning to ask for a federal bailout but they once again faced an uphill battle in winning the necessary support from Congress.
Before the CEOs of General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC even started their comments before the House Financial Services Committee, they faced criticism from the committee's ranking Republican, Spencer Bachus of Alabama.
"My constituents do not understand why their tax dollars should go to support what they consider less efficient businesses," said Bachus, adding that most of his constituents earn less money than the autoworkers whose jobs would be saved.
But House Financial Services Chairman Barney Frank, D-Mass., said it was wrong to focus on the pay of autoworkers when there was not much discussion of the pay of the average worker at financial firms that got government bailouts in October.
"I think the average AIG employee makes a good deal more than the auto workers," he said.
Frank criticized those who argued the automakers should file for bankruptcy in order to shed contracts with the unions and dealerships, saying that was "bankruptcy as a spectator sport." He said it would be unwise to ignore the damage that would be done to the overall economy if one or more automakers went bankrupt.
Bachus asked UAW President Ron Gettelfinger if the union would be willing to reopen the labor contract to grant more concessions. Gettelfinger said the union is always talking with the automakers but added that negotiations cannot be a one-way street.
"The UAW can't be the low hanging fruit. While we're at the table, we're asking that others come in and sacrifice as well," he said.
'When will you run out of money?'
The industry is asking for $25 billion in loans to tie them over through the current downturn and is offering the government an equity stake in the companies if they get the help.
The bailout drew support from Republican and Democratic members of the Michigan congressional delegation, who also testified before the committee.
"I think what's missing is a sense of urgency," said Sander Levin, a Democrat from Michigan. "We're thinking of leaving here and taking the risk of bankruptcy? There's a looming risk."
General Motors announced Nov. 7 that it could run out of the cash needed for operations by the end of this year or early next year without federal assistance.
In testimony before the Senate Banking Committee Tuesday, Chrysler CEO Robert Nardelli said his company is also at risk of running out of the cash it needs to operate in that time frame.
But Paul Kanjorski, D-Pa., said he wasn't sure it was proper to be bailing out the automakers and he didn't like the demand that action be taken in this lame duck session of Congress.
"I am not yet convinced that we must act so rashly," he said. "The American public demands that we get this right."
Kanjorski asked GM CEO Rick Wagoner for the minimum amount of money necessary to keep GM afloat through March 30 in order to give Congress more time to work on a bailout package. "When will you run out of money?" he asked.
But Wagoner wouldn't give more details beyond the company's previous statement that it could be out of cash later this year or early next year.
"I don't believe we have the luxury of a lot of time," he said, and when pressed for an exact deadline, responded, "I can't tell you that for certain."
Nardelli said Chrysler had looked at the option of filing for bankruptcy. But he said even if the company shed costs and contracts under bankruptcy, it would find suppliers demanding cash on delivery of parts, which would cause an even greater cash crunch.
"It would turn us upside down, quicker and deeper than we are today," he said.
Several supporters of a bailout pointed out that China and some governments in Europe are considering bailing out their own automakers.
"It is unacceptable for America not to make its own cars," said Rep. Carolyn Maloney, D-N.Y. "No other country would let a major industry fail."
But other Democrats seemed to be unhappy with the idea of helping automakers as well.
Rep. Maxine Waters, D-CA, said she thought that the bailout legislation would pass but complained about automakers' arrogance and lack of support for minority-owned dealerships.
"What we basically get here are the big boys, well connected and too big to fail," she said. "In the final analysis, people are going to roll and you'll get what you're asking for."
Gary Ackerman, D-NY, talked about how he couldn't get a new Cadillac in the color he wanted and couldn't get anyone to answer questions about problems with his GPS system. But he pointed out that his wife has had great service with an imported car.
"Maybe you can tell us what you're actually going to do to sell cars people want," he said. "Somebody heard that we're giving out free money in Washington. They're showing up from all over the place. But you don't want to put your last tourniquet on a dead guy."
The top Republican on the House Financial Services Committee said he's opposed to a $25 billion loan package for the Big Three.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: November 19, 2008: 12:38 PM ET
NEW YORK (CNNMoney.com) -- Auto industry executives were back on Capitol Hill Wednesday morning to ask for a federal bailout but they once again faced an uphill battle in winning the necessary support from Congress.
Before the CEOs of General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC even started their comments before the House Financial Services Committee, they faced criticism from the committee's ranking Republican, Spencer Bachus of Alabama.
"My constituents do not understand why their tax dollars should go to support what they consider less efficient businesses," said Bachus, adding that most of his constituents earn less money than the autoworkers whose jobs would be saved.
But House Financial Services Chairman Barney Frank, D-Mass., said it was wrong to focus on the pay of autoworkers when there was not much discussion of the pay of the average worker at financial firms that got government bailouts in October.
"I think the average AIG employee makes a good deal more than the auto workers," he said.
Frank criticized those who argued the automakers should file for bankruptcy in order to shed contracts with the unions and dealerships, saying that was "bankruptcy as a spectator sport." He said it would be unwise to ignore the damage that would be done to the overall economy if one or more automakers went bankrupt.
Bachus asked UAW President Ron Gettelfinger if the union would be willing to reopen the labor contract to grant more concessions. Gettelfinger said the union is always talking with the automakers but added that negotiations cannot be a one-way street.
"The UAW can't be the low hanging fruit. While we're at the table, we're asking that others come in and sacrifice as well," he said.
'When will you run out of money?'
The industry is asking for $25 billion in loans to tie them over through the current downturn and is offering the government an equity stake in the companies if they get the help.
The bailout drew support from Republican and Democratic members of the Michigan congressional delegation, who also testified before the committee.
"I think what's missing is a sense of urgency," said Sander Levin, a Democrat from Michigan. "We're thinking of leaving here and taking the risk of bankruptcy? There's a looming risk."
General Motors announced Nov. 7 that it could run out of the cash needed for operations by the end of this year or early next year without federal assistance.
In testimony before the Senate Banking Committee Tuesday, Chrysler CEO Robert Nardelli said his company is also at risk of running out of the cash it needs to operate in that time frame.
But Paul Kanjorski, D-Pa., said he wasn't sure it was proper to be bailing out the automakers and he didn't like the demand that action be taken in this lame duck session of Congress.
"I am not yet convinced that we must act so rashly," he said. "The American public demands that we get this right."
Kanjorski asked GM CEO Rick Wagoner for the minimum amount of money necessary to keep GM afloat through March 30 in order to give Congress more time to work on a bailout package. "When will you run out of money?" he asked.
But Wagoner wouldn't give more details beyond the company's previous statement that it could be out of cash later this year or early next year.
"I don't believe we have the luxury of a lot of time," he said, and when pressed for an exact deadline, responded, "I can't tell you that for certain."
Nardelli said Chrysler had looked at the option of filing for bankruptcy. But he said even if the company shed costs and contracts under bankruptcy, it would find suppliers demanding cash on delivery of parts, which would cause an even greater cash crunch.
"It would turn us upside down, quicker and deeper than we are today," he said.
Several supporters of a bailout pointed out that China and some governments in Europe are considering bailing out their own automakers.
"It is unacceptable for America not to make its own cars," said Rep. Carolyn Maloney, D-N.Y. "No other country would let a major industry fail."
But other Democrats seemed to be unhappy with the idea of helping automakers as well.
Rep. Maxine Waters, D-CA, said she thought that the bailout legislation would pass but complained about automakers' arrogance and lack of support for minority-owned dealerships.
"What we basically get here are the big boys, well connected and too big to fail," she said. "In the final analysis, people are going to roll and you'll get what you're asking for."
Gary Ackerman, D-NY, talked about how he couldn't get a new Cadillac in the color he wanted and couldn't get anyone to answer questions about problems with his GPS system. But he pointed out that his wife has had great service with an imported car.
"Maybe you can tell us what you're actually going to do to sell cars people want," he said. "Somebody heard that we're giving out free money in Washington. They're showing up from all over the place. But you don't want to put your last tourniquet on a dead guy."
