Congress Sends Detroit Execs Back — With Homework

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When they return to testify after Thanksgiving, it is hoped that the three CEOs will have learned from their disastrous experience. At a contentious panel Wednesday in the House Banking Committee, all three, after being repeatedly reproached for flying separate corporate jets to Washington to beg for money, refused to pledge that they would fly home on commercial planes or sell the company jets. Two of the three — GM's Richard Wagoner and Ford's Alan Mulally, who last year made a combined $37.4 million — also refused to give up their annual salaries. All the while, the trio, rounded out by Chrysler CEO Robert Nardelli, proclaimed their innocence for the mess their companies are in, laying the blame largely on an unprecedented credit crunch that has helped push car and truck sales to their lowest level in 25 years.

Given that poor p.r. offensive, it's no wonder Democratic leaders demanded that the companies prove they can not only survive with these loans but also repay them. "Until they show us the plan, we cannot show them the money," Pelosi quipped. Of course, what passes for a viable plan — or whether Congress is in any position to judge it — is anyone's guess. A Democratic leadership aide said lawmakers are looking for "proof that they won't be back, hat in hand, in 12 months' time." Another said they desired evidence "that they will be able to operate in the long term without government assistance, which by definition means green" technologies. (See TIME's special report on the environment.)

Certainly Michigan Senators Carl Levin and Debbie Stabenow — along with three of their colleagues from other states whose economies depend on the auto industry, including Republicans Kit Bond of Missouri and George Voinovich of Ohio — felt their plan was sufficient. At a much subdued press conference held right after Reid and Pelosi's wrapped up, they unveiled their compromise, which would pull the $25 billion from a fund approved earlier this year to help the auto industry develop more fuel-efficient cars; that notion had actually been pushed by Republicans earlier in the week, but until Thursday, Democrats had contended that the money should instead come from the $700 billion financial-bailout fund. The deal would include strict limits on golden parachutes for executives and a timeline to pay back Congress. The Commerce Department would have to approve the applicants after judging them to be capable of repaying the loans. "I am encouraged that the leaders are now taking this issue on and that they are committed," Levin said.

After a week in which they were berated for their incompetence, the automakers reacted to the proposal with cautious optimism. "We appreciate the Congress's recognition of the auto industry's vital contribution to the nation's economic strength and national security. We intend to deliver a plan to Congress that shows them a viable General Motors," said GM spokesman Greg Martin. "We agree completely that there must be accountability to U.S. taxpayers for government support that enables automakers to continue their restructuring and to ensure a stronger, more competitive auto industry." For its part, Ford, which is the strongest of the Big Three and, many believe, capable of surviving the fallout from a GM bankruptcy, said, "We have a great plan that will continue Ford's transformation into a lean, profitable company that delivers the safe, fuel-efficient, high-quality new products that our customers want and value."

United Auto Workers head Ron Gettelfinger — who also appeared on Capitol Hill on Wednesday but has so far escaped much of Congress's wrath despite his union's crippling labor deals — used a press conference on Thursday to bash what he said was the hypocrisy of certain Detroit opponents in Congress. Many of the same Senators and Representatives who vehemently object to giving any aid to carmakers, he claimed, come from states that have shelled out big bucks as incentive to lure foreign automakers to set up plants. "It just seems odd to us that we can offer incentives to our competitors to come here and compete against us, but at the same time we are willing to walk away from an industry that is the backbone of our economy," he said.

Even if the aid package passes, it's no guarantee domestic carmakers will survive. Consumption, the chief engine of economic growth in the U.S., could shrink roughly 1% in 2009 in what could be the worst recession since the 1930s, according to Richard Curtin, director of the University of Michigan's survey of consumer sentiment. As if Detroit isn't hurting enough, its biggest longtime booster in Washington, Michigan Representative John Dingell, lost his powerful perch as head of the House Energy and Commerce Committee in a caucus vote on Thursday. For 28 years, Dingell had helped craft every piece of environmental legislation, but he will now have to hand his gavel to California Representative Henry Waxman, a darling of environmental groups.

While there are no stipulations on the specifics of the business plans, it's no secret that Republicans on the Hill and many industry observers believe the Big Three desperately need a change of leadership. So far, though, none of the companies have given any indication that they are willing to clean house at the top in order to curry favor with Washington. If they don't get enough votes to pass the bailout package, that refusal to put someone different at the wheel may prove to be a very costly miscalculation.

— With reporting by Joseph R. Szczesny / Detroit

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