From left are: Richard Wagoner, Chairman and CEO of General Motors, President of the United Auto Workers International Union Ron Gettelfinger, Alan Mulally, President and CEO of Ford Motor Company, and Robert Nardelli, Chairman and CEO of Chyrsler LLC.
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Dodd has been given the unenviable task of coming up with a compromise bill in a matter of days before Congress adjourns for the year. One solution would be to divert the $25 billion from the modernization fund and then take $9 billion more from the bank-bailout funds. In this scenario, the Senate would pass the measure first, but whether such a move would pass the House is far from certain, as leadership from both sides of the aisle have voiced opposition to pieces of such a plan.
The Senators on the panel did agree on one thing: that any money would not come without some strings. "It's happening with the [$700 billion bank-bailout] program, where there is no strategy, and we're just throwing money out there," said Senator Bob Menendez, a New Jersey Democrat. In addition to monthly updates on the Big Three's progress, many members of Congress want an oversight board or a single trustee to be empowered to win concessions from employees, retirees, dealers and creditors that are essential for any long-term restructuring plan to work.
Many members were particularly wary about how Chrysler, which is controlled by a private-equity fund and has made no secret that it's shopping for a merger partner, will spend the money. "It troubles me a little bit knowing that basically all we're really doing is providing a little capital for y'all to hang around long enough to get married," said Republican Bob Corker of Tennessee.
"I can assure you, Senator, that I don't wake up every morning thinking about how to sell the company. We're busting our guts and the people who are left there are busting their guts to make this thing work," Chrysler CEO Robert Nardelli argued back. At another point in the hearing, Nardelli told Dodd that the weakest of the Big Three can survive alone and that $7 billion is all it will need "to avoid, Mr. Chairman, having to come back and again ask you for support." Utah's Bennett broached the idea of Congress writing into any package a proviso forcing GM and Chrysler to merge. UAW chief Gettelfinger questioned the benefits of such a move, saying, "In terms of synergies, it's debatable about how effective it would be." Wagoner said he was open to looking at it. And Nardelli said that even though it would mean he'd lose his job, "if it was the only way to save Chrysler ... then I'd do it."
The Big Three's claims that they would not have to come back for more money soon was met with great skepticism from both the lawmakers and an economist testifying side by side with the CEOs, Mark Zandi of Moody's Economy.com. Given declining vehicle sales and market share and the amount of profit they make per car — about $4,000 less than Toyota, for example — Zandi said he expects the Big Three would survive only until fall 2009 before they would be forced to return to Washington to beg for more money. "I'm skeptical, doubtful that it's going to end in $34 billion," he said. "I estimate it'll be more like $75 billion to $125 billion."
Still, Zandi stressed that even that amount would be dwarfed by the costs of the alternative: the entire (or even just part of) the auto industry going under. Some Republicans like Corker argue that a bankruptcy reorganization — potentially aided by temporary government financing — is the only way for the automakers to make the serious reforms (closing factories and dealerships and cutting union wages and benefits) necessary to make them truly competitive with foreign competition. But Zandi stated what many experts believe, that bankruptcy for the already ailing automakers would mean only one thing: total liquidation and a potential loss of hundreds of thousands, or even millions, of jobs. "Bankruptcy at this point would be cataclysmic for the economy," he stated plainly.
One lesson the CEOs had clearly learned since their last disastrous appearance on Capitol Hill was the need to present a better face to their plight. They all drove hybrid or fuel-cell vehicles from Detroit, in stark contrast to the corporate jets all three arrived in last month. Senator Richard Shelby of Alabama, the top Republican on the panel and a fierce opponent of giving them any aid, grilled them on their road trips. "Did you drive? Did you have a driver?" he pressed. "Do you plan on driving back?"
All three said they had carpooled or drove themselves and planned on driving back. "Where'd you stay? What'd you eat?" Dodd, a Connecticut Democrat, quipped.
"Mr. Chairman, I don't want to make light of this," Shelby tersely replied, citing a CNN poll released Thursday that showed 60% of Americans are opposed to bailing out the automakers.
As if to highlight the unpopularity of a potential rescue package, a dozen or so protesters in the back of the room interrupted the hearing an hour later: "The bailout is a sell out! The poor are suffering!" they chanted. A few yelled additional complaints: "The homeless! The homeless!" "Money off the poor people's backs!" "Put the money in the food banks where people need it!"
On Friday, lawmakers on the House Banking Committee will get their second round with the Big Three. And if the hours of grilling in the Senate seemed tough, they are sure to face much more skepticism from the lower chamber of Congress. Senate Majority Leader Harry Reid and Pelosi have said that if both committees approve of Detroit's recovery plans, they will call Congress back into session next week to pass a bill. Of all the compromises open to lawmakers, one thing is nearly certain: the bigger and more complicated the plan, the less likely it is to pass.