Detroit Three, UAW Meet Congressional Delegation for Financial Help
By Michelle Krebs November 6, 2008By Michelle Krebs
The chiefs of Detroit's three automakers and the president of the UAW are scheduled to meet at 4 p.m. Thursday with a Congressional delegation in Washington, D.C., in an effort to obtain loans to keep them afloat through the next year.
General Motors' Rick Wagoner, Ford's Alan Mulally, Chrysler's Robert Nardelli and the UAW's Ron Gettelfinger were set to meet with Speaker of the House Nancy Pelosi as well as Michigan Congressman John Dingell and others to plea their case.
Originally, General Motors and Chrysler had proposed to merge and had gone to Washington seeking $10 billion to fund the merger. The funds would help with pensions, severance packages and associated costs for the inevitable layoff of workers and closures of plants.
However, the two quickly found Washington had no appetite for funding such a merger that would mean massive job losses. A particularly sticking point was the fact that Chrysler is 80-percent owned by private-equity firm Cerberus Capital Management.
The newest strategy is to seek $25 billion in low-interest loans, shared among the three of them, in addition to the $25 billion already approved under last year's energy act to help automakers -- both from Detroit and foreign as well as their suppliers -- move to more fuel-efficient vehicles and technologies.
On Thursday, the White House told automakers and other companies to submit applications for those $25 billion in loans, a day after the Bush administration announced it had accelerated the rule-making for the loans. Originally, the rules for those loans were not expected to be completed until well into next year.
"We encourage the auto makers and other eligible companies to file their applications to obtain loans for qualifying projects so they can produce more fuel-efficient vehicles which consumers are demanding," White House spokesman Tony Fratto said.
The automakers are using a new report from the Center for Automotive Research (CAR) in Ann Arbor, Michigan, that shows the devastating job losses and damage to the U.S. economy if one, two or all three of the automakers fail.
Meanwhile, time is running out on Detroit automakers as they burn through cash by the billions per month. Insiders say Chrysler executives have told them the automaker will run out of cash in February. Ford and GM report third-quarter earnings Friday, and the results are expected to be horrific. Ford and GM combined already lost $24 billion in the last quarter alone -- almost as much as the three companies are requesting of the federal government.
GM North America President Troy Clarke said in a speech picked up by CNN Wednesday night said the next 100 days, during which President-Elect Barack Obama takes the office, are critical.
"We certainly intend to make sure the new Obama administration understands and appreciates the immense significance of our industry and the issues facing our business. And that the cost of support to the auto industry is cheap when you consider the potential ramifications and future benefits," Clarke said in his speech.
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