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19  11 2008

Big U.S. Automakers Detroit Aid To Stave Off Potential Collapse

Senator Michael B. Enzi, Republican of WyomingHeads of the Big Three automakers in Detroit pleaded on Tuesday for the government emergency aid to stave off potential collapse, but after four hours of testimony, seemed to have convinced enough lawmakers to move quickly on a bailout.
Senate Democratic leaders said they were not able to muster support for legislation that would provide 25 billion to $ troubled auto industry from the Department of the Treasury $ 700 billion economic rescue fund.
There is still a possibility that money may be issued for Detroit previously approved for a loan program to help automakers retool their plants for more fuel-efficient vehicles.
But heavy industry has received a warm reception in Washington, despite its mounting problems. Frenzied bidding from Detroit to help laid bare was packed at a hearing of the Senate banking committee, in which two of the three automakers have said they might run out of money by the end of the year.
Because of their failure was not mistakes of management, they said, but the weak economy and the inability of consumers to obtain credit to buy cars.
Directors of General Motors, Ford Motor and Chrysler seemed amazed by the general lack of confidence showed lawmakers that their companies.

“We have little evidence that the 25 billion $ will do nothing to promote long-term success,” said Senator Michael B. Enzi, Republican of Wyoming.

The discussions were tense, with automotive executives on the defensive from the start. At times, it appeared lawmakers had little familiarity with deep reorganization steps already taken by the companies. On the other hand, executives of Detroit painted a depressing picture of an industry under siege. Chief executive of G.M. Chrysler said their companies were using up their cash at a rate that could leave them close to insolvency, without federal aid.

“Without immediate bridge financing support, Chrysler liquidity could fall below the level needed to sustain operations,” said Robert L. Nardelli, president of Chrysler.

These comments were echoed by the chairman of GM, Rick Wagoner, who has warned that the rippling impact of the auto industry’s cash woes could put three million American jobs at risk.

He said that a failure by GM, Ford or Chrysler would be quickly throughout the domestic industry down. “The social costs would be catastrophic - three million jobs lost in the first year, U.S. personal income declined by $ 150 billion of government and a tax loss of more than $ 156 billion over three years,” he Mr. Wagoner said.

Alan R. Mulally, chief executive of Ford, added, “If any of the domestic companies should not believe that there is a strong chance that the whole industry would face severe disruption.”

Despite the urgent tone of directors, lawmakers in both parties have seen that a little chance bailout could be put together and passed during the current lame-duck session. Bush administration firmness and perseverance of the denied requests by Democratic leaders to tap financial rescue program to aid automakers.

Secretary of Treasury Henry M. Paulson Jr., at a House hearing on Tuesday morning and again at a lunch with Republican senators, implored lawmakers to oppose using any of the $ 700 billion financial bailout for auto companies, he said, which would set a dangerous precedent.

The White House pushed instead for auto companies to gain immediate access to 25 $ billion in loans for a previously approved retool production plants to make fuel-efficient vehicles.

To television watchers have returned home dueling news conferences and hearings carefully raised even more questions and answers carefully rehearsed. Behind the scenes, their auto executives and lobbyists scrambled from office to office pressing influential lawmakers to take up the cause.

In addition to banking committee hearing, liberal demonstrators preached anti-corporate lecture. And a small corps of Japanese journalists follows the fate of American companies, the rivals Toyota and Nissan.

Senator Carl Levin, Democrat of Michigan and an auto industry manager allies on Capitol Hill, said he still hoped a deal to provide quick access to 25 billion in loans of $ could be resolved. Mr. Levin has acknowledged progress on hammering the details was made, but said efforts were undertaken.

Mr. Levin told the lawmakers that they were the more approach, including rewriting the provision that mandates that go any subsidized loans advanced to the retooling of plants to produce fuel-efficient machinery.

Suddenness of the cash crisis at G.M. Washington was caught by surprise.

Senator Richard C. Shelby of Alabama, ranking Republican on the banking committee, he said he was skeptical enough Detroit companies could reorganize their operations and improve their competitiveness.

“What happens to this money be used?” He said. “It will be used to improve their business model and product lines, or is this just life support?”

Hearing highlighted how deeply complicated problems are the Big Three, which have been losing billions of dollars even as close factories and cut tens of thousands of jobs.

It also stirred criticism again Detroit’s ability to compete in the global market. Several senators called into question the carmakers’ vehicle quality, high labor costs and the ability of their senior management.

Senator Christopher J. Dodd, who is chairman of the banking committee and was generally supportive of aid to the auto companies, has given little comfort to Detroit executives.

“Their discomfort to come to Congress with hat in hand is exceeded only by the fact that they are seeking treatment for injuries which are largely self-caused,” he said. “No one can say that not see that.”

But he argued that auto executives their response strategies have been preserved only by taking the economy faltered and dried credit available to consumers.

Overall, U.S. vehicle market fell to 14.8 percent through the first 10 months of the year. However, sales in October plummeted 31.9 percent, mostly because of a lack of credit available for potential car buyers.

“There is no great mystery why the huge decline in sales occurred,” said Ron Gettelfinger, president of the United Automobile Workers. “Because of the global credit crunch, most families can not obtain credit on reasonable terms to finance the purchase of a vehicle.”

While Democratic lawmakers have vowed to some kind of aid for Detroit this week, the process to develop a coherent and effective package proved to be elusive.

After the hearing, Mr. Dodd was greeted in the hallway reporters ask him if he “had the votes” to determine Detroit. “For what?” He said, indicating that a vote on the legislation this week was questionable.

Detroit is huge financial problems have caused some legislators to question the rush to hasten a bailout by Congress.

“I am prepared to consider economic aid to automakers, but for regular supply is followed,” said Senator Arlen Specter, Republican of Pennsylvania. “And what I mean, we have a bill we know the specifics, to have a chance to study, to have hearings, to have a floor debate, to have changes.”

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