U.S. could dole out funds to carmakers

Big Three say they could work with federal monitors

December 05, 2008|By Jim Puzzaghera | Jim Puzzaghera,Tribune Washington Bureau

WASHINGTON -

Humbled and increasingly desperate as new car sales plummet, the heads of the country's Big Three automakers said yesterday that the $34 billion government bailout they seek could be doled out piecemeal with federal monitors making sure the money was spent wisely.

Despite the possibility that one or more of the companies could fail and thousands of workers be laid off, skepticism remained high on Capitol Hill about whether Detroit had seen the need to become more competitive, about the likely effectiveness of a bailout, and about whether the companies would soon be asking for more money.

"In just two short weeks the price tag has jumped from ... $25 billion to $34 billion," said Sen. Richard C. Shelby of Alabama, the Senate Banking Committee's top Republican, who expressed opposition to a bailout as auto executives testified before the panel.

Democrats are generally more sympathetic to a bailout, but leaders remain at loggerheads with the Bush administration over where the money should come from. Neither Republicans nor Democrats want to risk the damage to the economy that the failure of one or more of the Big Three would entail.

"Make no mistake about it, those consequences would be severe and sweeping," committee Chairman Christopher J. Dodd, a Connecticut Democrat, said at the start of a nearly six-hour hearing.

The idea of paying out government funds in pieces appeared to gain traction among members of Congress. About half the money would be disbursed quickly to keep the companies afloat through March 31. The rest would be held back until a government board of trustees was convinced that the companies were making progress toward becoming more fuel-efficient and competitive.

Sen. Charles E. Schumer, a New York Democrat, pushed the idea of a single trustee designated by the president to control disbursement of money after March 31 and force changes on the companies and the United Autoworkers union.

The company executives endorsed the approach.

"It would be very helpful for us ... to have someone to work with on this, to submit our proposals, and then for that person to say, "OK, don't agree with that. You've got to change this," said GM CEO Richard Wagoner.

A spokesman for GM Powertrain's Baltimore Transmission Plant defended the automakers' request for federal help in a conference call yesterday. John Raut said the company has been making changes for several years - including producing hybrid and electric cars - but that the economic meltdown caught carmakers off guard. "We had a good plan in place," he said. "Then this economic crisis hit and it really wiped out everything."

Raut, joined by Keith Scott, president and CEO of the Baltimore County Chamber of Commerce, and Gene Dinatale, chairman of the United Autoworkers local 239 chapter of retirees, said the fall of General Motors would have a broad impact across Maryland and the nation.

Another idea floated at the hearing was to force banks that have received bailout money to lend to the automakers, with government guarantees on the loans. That would require federal officials to renegotiate the terms. Some suggested that Chrysler and GM should be required to merge.

GM said it needed $4 billion this month to avoid bankruptcy, another $8 billion to avoid it next year, and a $6 billion line of credit if economic conditions worsen. Chrysler said it needed $7 billion in loans or it could run out of cash early next year. Ford requested only a "stand-by line of credit" of up to $9 billion but said a failure by either competitor could threaten it as well.

Baltimore Sun reporter Andrea Walker contributed to this article.

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