Automakers will have second chance to request bailout

The Democratic leadership from the House and Senate held a press conference to announce that since the auto industry has failed to convince Congress that their suggested rescue plan will not be their last request, there will be no agreement on a bailout this week. However, the CEOs from the Big 3 automakers will have another opportunity to make their case to Congress

"We're requesting that they submit a plan to Congress through Chairman Frank and Chairman Dodd no later than December 2nd. These two very able men will review the plan if necessary hold hearings during the week of December 2nd to fully vet the auto industry's proposal," said Senate Majority Leader Harry Reid (D-Nev.).

Reid stated that Congress was prepared to come back in session the week of December 8th, but only if the Big 3 auto makers submitted a plan that will provide accountability.

"Until we see a plan where the auto industry is held accountable and a plan for viability on how they go into the future...we cannot show them the money," said House Speaker Nancy Pelosi (D-Calif.).

Pelosi went on to reject the calls that have been made for the automakers to declare bankruptcy.

"This is our response to those who would say 'let them go, let them go and deal with it after that'. This is an important industry in our country and we intend to save it. We can only do this if we work together and the auto industry has to come up with a plan for innovation, accountability, and viability," said Pelosi.

Big three automakers bid for bailout

Representatives from the flailing Big Three automakers appeared before the Senate Banking, Housing and Urban Affairs Committee Tuesday to make their case for receiving a 25 billion dollar bailout.

Alan Mulally, president and CEO of the Ford Motor Company; Robert Nardelli, chairman and CEO of Chrysler LLC, and Richard Wagoner Jr., chairman and CEO of General Motors explained that if they were to fail, there would be millions of lost jobs across the entire spectrum of the automobile industry, from those in manufacturing positions to those who work in dealerships.

While the committee members’ opinions about the bailout were mixed, the sense of cautious doubt seemed unanimous.

“Let me say what I have said previously: I support efforts to assist the industry. Not because their leaders necessarily deserve taxpayer’s help. On the contrary, they deserve no more help than do the leaders of the financial companies that created the subprime mortgage mess that has exploded into a global financial crisis,” said Chairman Chris Dodd (D-Conn.)

Dodd asserted that the blame for the Big Three’s dilemma rested on the CEO’s themselves.

“None of us relishes being here today to consider these prospects. That goes for our company and labor witnesses. Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact that they are seeking treatment for wounds that I believe are to a large extent self-inflected,” said Dodd.

However, the Big Three disagreed that they should be held responsible, with the Ford and GM CEOs saying that their companies were headed towards profits until the credit crisis hit. The result was that the consumers ability to buy cars was severely impacted and gains quickly dropped.

The automakers also rejected the notion that they have not been innovative and have been refusing to make needed changes. All three companies have begun the creation of hybrid vehicles and have made attempts to reach more effective labor costs.

The CEOs flatly disagreed with suggestions that they declare Chapter 11, citing that there would be no real benefit since the restructuring that would come with a bankruptcy declaration was already being attempted. This would be coupled with the companies supposed inability to maintain liquidity on remaining products, since they contended that few consumers would purchase a product from a folding company. Mulally also stated that Ford still owed wages to workers that would be lost if the company declared Chapter 11.

An additional witness, Peter Morici; economist and professor at the University of Maryland School of Business, disagreed and said that Chapter 11 was a viable option.

“If Chapter 11 is put off, the successors to GM, Ford and Chrysler that emerge from a bankruptcy reorganization process will be smaller and support fewer jobs than if these companies endure this difficult transition in 2009. More jobs can be saved among GM, Ford and Chrysler and their suppliers if bankruptcy reorganization is endured now than in the future.”