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Heated debate over auto bailout
Published:2008-11-20 0:00:00 Publisher:admin
NEW YORK (CNNMoney.com) -- The case for a bailout of U.S. automakers came under sharp scrutiny on Tuesday at a congressional hearing that portrayed the Big Three as both short-sighted in their business strategies and central to the economy. "Their board rooms in my view have been devoid of vision," said Sen. Christopher Dodd, D-Conn. "They have promoted and often driven the demand of inefficient, gas guzzling vehicles, and dismissed the threat of global warming." Dodd, chairman of the Senate Banking Committee, spoke as Congress kicked off the first of two days of hearings over whether the government should extend a lifeline to the nation's troubled automakers. The head of the powerful United Auto Workers union, testifying side by side with the industry's top CEOs, said the failure of one automaker would shatter consumer confidence in the other two. "If one of these companies goes into bankruptcy, I'd be willing to bet it takes two, or possibly all three, with them," said Ron Gettelfinger , president of the autoworkers' union, said during questioning. The industry, already struggling because of high labor costs and weak sales, is being stung as car buying grinds to a halt amid credit difficulties, job losses and fears of a recession. The industry has been lobbying hard for a $25 billion loan from the $700 billion bailout slated for the finance sector. One Republican lawmaker, Sen. Michael Enzi of Wyoming, said he was uncertain a bailout would work. "We have little evidence this $25 billion will do anything to promote long-term success," Enzi said. But the industry and its advocates, as well as many experts, say that without federal help, General Motors (GM, Fortune 500) will likely go bankrupt within months, and that Ford (F, Fortune 500) and Chrysler LLC could soon follow. General Motors boss Rick Wagoner said his company was attempting to transform itself. He ticked off a long list of innovations - from developing nine hybrid models for next year to rapid development of the Chevy Volt, a car that runs on just electricity. "We felt we were well on the road to turning around the North American business," said Wagoner. "Since then, the industry and the economy has been hit hard by the global financial crisis. It threatens the turnaround and GM's financial survival." Chrysler Chief Executive Robert Nardelli, echoing Wagoner's remarks, said the industry is suffering a "critical lack of liquidity" because of nation's financial meltdown. Nardelli said that closely-held Chrysler was burning through $1 billion a month in capital. Ford's chief executive, Alan Mulally, said he understands the need for the industry to reorganize and that Ford has been doing just that. "Few companies have restructured more aggressively," he said, adding that Ford has closed 17 plants and reduced its workforce by 51,000 workers. "As a result of all of our actions, we were profitable in the first quarter of this year and well on our way to sustainable profitability before the economic and credit crisis hit," said Mulally.
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