America's embattled carmakers today pitched a more detailed and costlier bail-out plan that met with continued wariness from Congress, leaving US motor stocks lower and bankruptcy still an option.
General Motors plunged more than 15%, closing at $4.13 per share, as chief executive Rick Wagoner delivered a penitent statement to senators: "We're here because we made mistakes. And we're here because forces beyond our control have pushed us to the brink."
Shares of Ford closed more than 5% lower, at $2.66 per share, despite its outline of a rosier fiscal picture than its competitor. Ford is seeking a $9bn line of credit rather than direct government aid, while GM needs an immediate $4bn cash infusion and another $4bn by next month.
The two auto companies, along with privately owned Chrysler, learned their lesson after a dismal experience in Washington two weeks ago. The Detroit contingent travelled by hybrid car rather than cringe-inducing private jet, and each of the three CEOs agreed to cut their salaries to $1 if Congress approves their $34bn in loan requests.
But those concessions, in addition to promised givebacks by the United Auto Workers (UAW) labour union, may not be enough to win over politicians. With public frustration still running high over the White House's $700bn banking bail-out, even some Democrats were sceptical of spending more money to prop up carmakers.
"The atmosphere here in America is frankly pretty negative about any kind of assistance," Democratic senator Robert Casey said.
The Senate banking committee chairman, Democrat Chris Dodd, acknowledged that writing a workable Detroit bail-out within days is a "tall order" but added that he is "not opposed to trying".
"There is consensus, I believe, that inaction is not [an option]," Dodd told reporters. "There is also consensus that writing a check for $34 billion is not going to happen."
The auto rescue debate is shaping up as a game of chicken between Congress and the Bush administration, which has the authority to use its banking bail-out money on Detroit but opposes the idea.
Neither side supports letting the US motor industry go under, but critics are openly weighing a "pre-packaged" bankruptcy of limited duration that would force one or more of the car companies into a more severe restructuring than currently proposed.
In exchange for its $12bn in total loans, GM has promised to sell its corporate jet fleet and stop paying shareholder dividends until it begins repaying the government in 2011.
Chrysler has asked for $7bn to ensure its survival through this month as part of what CEO Robert Nardelli called a "seeking of shared sacrifice". He also vowed to seek out an alliance with a foreign carmaker to ensure the company's continued viability.
The UAW, for its part, has offered to put off healthcare fund payments that the three companies agreed to pay during contract negotiations last year. The union is also open to ending the "jobs bank" programme that enabled laid-off employees to keep claiming lucrative benefits.
But UAW chief Ron Gettelfinger hit back at Republicans who he said "attempt[ed] to make workers and retirees the scapegoats", pointing out that wages and benefits only make up 10% of the auto companies' cost burden.
Auto retailers and parts suppliers also sent representatives to plead for a bail-out as opposed to a structured bankruptcy, which could set off a domino effect of decreased demand that might ravage their industry.
Dodd's Republican counterpart on the banking panel, Richard Shelby, leads a conservative contingent that has long opposed government aid to both Wall Street and the auto industry.
Republican concerns were partly borne out by Mark Zandi, the chief economist for Moodys.com and a former adviser to John McCain, who cautioned that "$34 billion may not be enough" and suggested that the real price tag for an auto rescue could top $100bn.
Support for the auto rescue in the House of Representatives, where GM, Ford, and Chrysler will appear tomorrow, appears even shakier. Both halves of Congress are poised to convene next week for a vote on the $34bn in loans.
The fate of the carmakers is likely to depend on Dodd's ability to find a mutually agreeable funding stream for the loans. A group of mid-western politicians from both parties has proposed compromising with the lame-duck president by using a $25bn fuel-efficiency fund already approved by Congress, but senior Democrats remain critical of that approach.
White House spokeswoman Dana Perino was hesitant to predict a deal with the Democratic-controlled Congress saying: "The linchpin of our support for the automakers has been that we would not provide taxpayer dollars unless they could prove long-term viability."
