Page last updated at 01:33 GMT, Wednesday, 19 November 2008

US car companies seek $25bn aid


Bosses of US car manufacturers ask for aid

The bosses of the three biggest US carmakers, Ford, GM and Chrysler, have asked Congress for a $25bn bail-out.

They told a Senate hearing that without the rescue package, their firms risked collapse, and warned of broader risks to the US economy.

GM chief executive Rick Wagoner said the firm needed a loan to span the "financial chasm" that had opened up.

However, Republicans and the White House do not want to use the $700bn bank rescue to help car firms.

GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who has promised to help the industry - is sworn in in January.

The BBC's Richard Lister in Washington says the last thing Mr Obama wants is to oversee the death of manufacturing icons during his first few months in office.

Inefficient production

Mr Wagoner told the Senate banking committee that the industry's predicament was not due to failures by management but because of the deepening global financial crisis.

I'm concerned... we're about to employ the 'ready, fire, aim' approach to problem-solving
Richard Shelby
Republican senator

He warned millions of jobs and 4% of GDP could be lost without government action.

"It's about saving the US economy from a catastrophic collapse," he said.

But sympathy for the industry appeared to be sparse among senators from both sides, our correspondent says.

The committee chairman, Christopher Dodd, a Democrat, said that the industry was "seeking treatment for wounds that were largely self-inflicted".

But he agreed that "hundreds of thousands would lose their jobs" if the companies were allowed to collapse.

Alabama Senator Richard Shelby, a Republican, also voiced doubts about the rescue package.

"As we consider altering the Treasury bail-out programme to provide cash and assistance to the domestic auto-manufacturers, I'm concerned that, once again, we're about to employ the 'ready, fire, aim' approach to problem-solving," he said.

Republican critics say the larger financial crisis is not the only reason why the biggest US carmakers are in trouble.

They say that the Ford, GM and Chrysler's production was inefficient, and that their labour costs were higher than many of their foreign rivals.

Mr Wagoner said that despite some public perceptions that GM was not keeping pace with the times "we were well on the road to turning our North American business around".

"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II," he said.

Economic impact

Car executives argue that the failure of the industry would have a catastrophic impact, with three million jobs lost within the first year.

US highway
The US car industry is in need of resuscitation

Ford's president, Alan Mulally, said a failure at even one car company would have widespread consequences.

"The industry is so interdependent," he said.

"We're nearly 10% of the US GDP, and if one of the automobile manufacturers gets into serious trouble, it has just tremendous implications for the entire industry."

Congressional leaders are working behind the scenes in an effort to work out a compromise that could give some financial aid to the carmakers before the end of the year, but the outlook remains poor.

In an earlier hearing on Tuesday, Treasury Secretary Henry Paulson also resisted diverting funds to the US car industry.

Democrats have so far rejected the option favoured by the White House and Republicans, which is to let the industry use a $25bn loan programme designed to help the companies develop more fuel-efficient vehicles.

The hearings are due to continue later on Wednesday.

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