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Democrats may have been the big victors on Election Day. But the Republicans still in charge in the White House and representing a possibly immovable minority in the Senate may keep the U.S. auto industry from getting the help it needs before Barack Obama is inaugurated as president in January.
To persuade wary Republicans to go along with a rescue package, a House bill being crafted would give the government stock warrants, an equity stake in the automakers. It also has a provision that would put taxpayers at or near the head of the line for debt repayment when the companies recover.
Without at least $15 billion in loans, General Motors (GM, news, msgs), say insiders, could face bankruptcy next year. The total loan package sought by Democrats for automakers and their suppliers could be as high as $50 billion, a number floated by aides to President-elect Obama.
- Talk back: Should we bail out the Big 3?
GM Chief Executive Officer G. Richard Wagoner said Nov. 13, in an interview with Automotive News, that he is willing to accept just about any condition on the loans he has heard expressed by political leaders.
"Whether that's stock warrants, restrictions on executive compensation and golden parachutes, we've said we're very willing to accept those," Wagoner said.
In announcing GM's fifth consecutive quarterly loss last week, Wagoner said GM may run out of cash to operate before mid-2009.
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The automaker "cannot assume we are going to get financial assistance" and may have to close two more assembly plants, Nardelli said at a conference in Palm Desert, Calif. The House and Senate committees overseeing the financial-services industries have called hearings for Tuesday and Wednesday that will involve testimony from the CEOs of GM, Ford (F, news, msgs) and Chrysler, as well as other authorities from the auto industry.
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As Motown goes . . . How big a hit will the economy take if the US auto industry goes under? A CNBC panel examines the consequences.
Questions for the auto industry leaders are expected to focus on the following:
- How did GM get to the point of near-bankruptcy?
- What kinds of guarantees can you offer Congress that your companies will be viable after a possible infusion of loans?
- How sure are you that you will be able to pay it back? How real is the threat of more than a million jobs going away if GM files for Chapter 11?
- Why are you so top-heavy in trucks and SUVs, when Toyota Motor (TM, news, msgs) and Honda Motor (HMC, news, msgs) are not?
- How specifically will you use the liquidity?
And specifically to GM and Chrysler:
- Will you use the money in 2009 to help achieve a merger of your two companies? If so, why is it necessary?
- Will you commit to significant restrictions on executive compensation as a condition of these loans?
Continued: 'No love of organized labor'
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