Big Three face tough questions from senators

Executives for the Big Three auto companies appeared contrite while asking for a $34 billion federal rescue, but their pleas were met with skepticism from senators struggling to craft a deal.

Senators from both sides of the aisle offered a wide range of legislative suggestions during a Senate Banking Committee hearing, from bankruptcy packages to a government-appointed oversight board that would pay out money over time. But the senators appeared far from settling on any one specific proposal.

{mosads}Sen. Chris Dodd (D-Conn.), chairman of the Banking panel, said that automakers’ plans represented an improvement from their much-maligned testimony last month, but he had new skepticism for some of the plans. “There is a for sale sign out here with Chrysler,” he said. Chrylser LLC has asked for $7 billion from the government.

Meanwhile, Sen. Charles Schumer (D-N.Y.), while expressing his support for helping the industry, also criticized the companies and said the government should set up a single oversight position.

“I don’t trust the car companies’ leadership,” Schumer said. “I worry that, if left on their own, they’ll be back asking for more.” Schumer suggested that a single trustee should be appointed to oversee the negotiations between the companies, labor unions and company creditors.

Many Senate Republicans continue to oppose a government bailout. Sen. Richard Shelby (R-Ala.) underscored his belief that bankruptcy is the best solution, if one of the Big Three should fail.

“In just two weeks, the price tag has jumped from $25 billion to $34 billion,” Shelby said. “I’m interested to hear what changed, and why we should believe that things will get better as our economy continues to deteriorate.” He called the automakers’ plans “not serious” and lacking in details. “I suspect any sensible banker would summarily dismiss your request,” he said.

Dodd and other Democrats continued to press the White House into helping the auto industry through the Treasury Department or the Federal Reserve. Dodd appeared to be searching for a compromise between Congress and the executive branch that could rely on money from several areas.

“Having 535 members of Congress have to make these decisions is difficult,” Dodd said. “There are other options available.”

Senators from states that rely heavily on the auto industry pressed their case on Thursday, appearing with the CEOs and comparing the auto debate with the federal government’s moves to support the country’s financial institutions.

“We’re asking extraordinary things of our witnesses today,” said Sen. Sherrod Brown (D-Ohio). “We didn’t ask the CEO of Wells Fargo to come in an armored truck.”

The Big Three CEOs repeatedly said they had made mistakes in both their business model in recent years as well as in congressional hearings last month. Gone were the corporate jets and suggestions that the company CEOs would not take a pay cut. The companies made a highly publicized effort to appear in hybrid vehicles and agree to a $1 salary.

“It’s fair to say that last month’s hearings were difficult for us,” Rick Wagoner, GM’s CEO, said, “but we have learned a lot.”
Mark Zandi, an economist at Moody’s Economy.com, said the $34 billion estimate vastly undershot the amount of money the companies would most likely need. His estimate: $75 billion to $125 billion.

The senators broke up some tough questioning on why they wouldn’t need more than the $34 billion to take the CEOs to task over flying to Washington last month on the corporate jets.

“You flew up here before,” Shelby said, finishing his first round of questioning. “Did you drive a little, ride a little? And secondly, are you going to drive back?”

That led Dodd to interject: “Where did you stay? What did you eat?”

Shelby countered that Dodd’s comment was “making light of this.”

The companies’ CEOs didn’t attempt to add any humor of their own, dutifully checking off that they drove from Detroit. Chrysler’s CEO rotated driving duties with another and left Tuesday night. Ford’s CEO carpooled, and GM’s head said he intended to drive back himself either Friday or Saturday.

About four hours into the hearing, two dozen protesters interrupted the senators’ questions, chanting, “the bailout is a sellout,” and “put the money in the food bank.” The protesters went on for a few minutes before being escorted out of the hearing room.