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US Congress expecting more sacrifices from automakers

(Agencies)
Updated: 2008-11-26 09:11

Besides getting called out for flying to Washington on separate corporate jets, a lack of answers from the CEOs was a big part of the problem last week and a big reason why the CEOs were chastised by hostile lawmakers, said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight.

"All of that information that was requested should have been communicated during the first round of hearings," Bragman said. "The communication job that they've done thus far to the public and the Congress to get the bailout has been very poor."

US President George W. Bush speaks November 19, 2008 during ceremonies in honour of the re-opening of the National Museum of American History in Washington, DC.The White House assailed Congress for putting off a vote on whether to bail out the struggling auto industry, blasting Democrats for their "mindless opposition," a spokeswoman said Friday. [Agencies]

Sen. Debbie Stabenow, D-Mich., said the companies need to talk about advanced vehicles under development and give a specific accounting of how much in loans they need and why.

"The image that they project is very important. It's important that they show at every level they understand how serious this is and that they're willing to make sacrifices as well," Stabenow said.

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Automakers need to "rhetorically indicate the willingness to take whatever additional steps are necessary to protect their companies," said Sen. Carl Levin, D-Mich. "These are good people who are running these companies. They have a sense of fiduciary duty."

The person with knowledge of Chrysler's plans said the automaker will present a detailed outline of its restructuring efforts as well as plans for long-term viability, and all stakeholders, including the UAW, parts suppliers, creditors and upper management, are discussing what sacrifices need to be made.

Debt may be refinanced, said the person, who didn't want to be identified because the plans have not been delivered to Congress. The automakers also must work out terms with lenders so the government can move into the senior creditor position, something that Pelosi and Reid have said is a requirement to get government loans.

All three automakers are strapped for cash as US auto sales have plummeted to a 25-year low, but GM is likely in the worst shape. It has burned through nearly $14 billion in the first nine months of this year and warned that it could reach the minimum amount of cash required to run the company by year's end. Chrysler LLC isn't far behind, but Ford Motor Co. says it can hang on through 2009 because of a huge loan it took out before credit markets froze up.

Detroit's carmakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If just one of the automakers should declare bankruptcy, some estimates put US job losses next year as high as 2.5 million.

Bragman said the CEOs have to do a better job of explaining the massive restructuring they have undertaken, including a host of new vehicles and a historic new contract with the UAW that cuts wages for new hires and shifts billions in retiree health care costs to a union-administered trust.

"Everything was in place, everything was on track, everything was looking very promising," Bragman said, "and then, through no fault of their own, quite frankly, the economy went south and nobody bought anything."

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