Business

Big 3 blame economy, beg for $25 billion

WASHINGTON — The CEOs of the nation's Big Three automakers didn't get much respect when they pulled up at the nation's money pump asking for a $25 billion fill-up.

Senators weren't in much of a mood to talk about it Tuesday, at least not without a heavy dose of sarcasm.

"No one can say that they didn't see this coming, "Banking Committee Chairman Chris Dodd, D-Conn, told the executives sitting in a row before him. The industry was "seeking treatments for wounds that I believe to a large extent were self-inflicted."

And Dodd is actually a supporter of the new lifeline, like most Democrats and President-elect Barack Obama.

Bailout foe Sen. Richard Shelby, R-Ala., asked: "Will it be used to improve their business model — which has been a failure — and product lines, or is this just life support?"

The three auto chieftains testified that the rescue loans weren't just to keep their companies afloat.

This could be a national catastrophe, they said, warning that millions of layoffs would follow their demise.

Still, the new rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who don't want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.

It's not the first time the U.S. auto industry has found itself behind the curve. In the late 1970s, when practically all they were building were fuel-inefficient heavy cars, tensions in the Middle East sent gasoline prices soaring — and suddenly demand for the big, expensive vehicles dried up.

Chrysler even persuaded Congress to bail it out with $1.2 billion in loan guarantees in 1979, money it paid back.

The auto executives blamed their current economic woes not on any management mistakes or lack of vision but on the larger financial crisis triggered by plunging home prices, rising mortgage foreclosures and frozen borrowing.

"There was this unbelievable bubble," said Chrysler LLC CEO Robert Nardelli. He first saw it in housing as chief of Home Depot Inc., and then with the bursting of the credit bubble as head of Chrysler.

As for the cars the Big Three have been building, Nardelli said they were only responding to customers who wanted more expensive, more powerful cars "to go with their second homes and boats."

General Motors Corp. CEO Rick Wagoner said that failure of the auto industry "would be catastrophic," resulting in 3 million jobs lost within the first year and "economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis."

Joining the Big Three CEOs, Ron Gettelfinger, president of the United Auto Workers union, said the emergency loans were important for the survival of the industry and union jobs. He said the UAW recognized that "in order for these companies to be competitive, we had to make tough calls" in labor concessions.

Congressional leaders worked behind the scenes trying to hammer out a compromise that could speed some aid to the automakers before year's end. But the outlook seemed poor.

"My sense is that nothing's going to happen this week," Sen. Bob Corker, R-Tenn., said at the opening of the hearing.

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