By John Hughes and Nicholas Johnston
Nov. 19 (Bloomberg) -- U.S. auto company executives today will make their plea for government aid for the second straight day, as prospects for a Democratic-backed assistance plan waned.
General Motors Corp. Chief Executive Richard Wagoner, Ford Motor Co.'s Alan Mulally and Robert Nardelli of Chrysler LLC are scheduled to testify today at a House Financial Services Committee hearing after telling a Senate panel yesterday that they need $25 billion to keep operating.
A plan by congressional Democrats to make the money available to automakers from the $700 billion bank-rescue fund isn't likely to pass amid opposition from President George W. Bush and Senate Republicans, raising the prospect of a cash squeeze at GM.
``Without fresh capital, we project that GM may not have sufficient liquidity to make it to year end,'' Deutsche Bank AG analysts including Rod Lache in New York wrote today in a note to investors.
GM, the biggest U.S. automaker, said Nov. 7 it may run out of operating cash as soon as this year, and will be ``significantly short'' of its needs by mid-2009, without new money or a turnaround in the auto market. Deutsche Bank said GM's plight may worsen should ``suppliers become uncomfortable with shipping parts on extended payment terms.''
Senator Robert Casey, a Pennsylvania Democrat, said yesterday that he hoped to get an aid plan passed this week, though a vote now on Democrats' proposal ``would not be successful.''
`I'm Open'
``If there are other ways to do it I'm open to discussion,'' he said.
Senate Republican leader Mitch McConnell of Kentucky said he backs Bush's idea of instead getting the $25 billion by expediting previously approved Energy Department loans. The loans were part of the 2007 bill and intended to help pay for retooling auto plants to build fuel-efficient cars, not to maintain auto-company operations.
Automakers ``might be willing to go along with'' speeding up the Energy Department loans, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, told reporters after a hearing yesterday. The idea would likely face opposition from House Speaker Nancy Pelosi, a California Democrat, he said.
Senate Majority Leader Harry Reid said any plan to use the Energy Department loans for the aid isn't ``going very far in our caucus.''
`Not Imminent'
Himanshu Patel, a JPMorgan Chase & Co. analyst in New York, said today in a note to investors that while he still expects the industry to receive some form of financial rescue, ``the timing of any such aid is not imminent.''
Congress had planned to spend only this week in a post- election lame-duck session, and Pelosi said she won't call lawmakers back for a session in December if they fail to resolve automaker aid this week.
GM slid 4.5 percent to $2.95 at 8:07 a.m. before regular New York Stock Exchange trading, while Ford fell 3 percent to $1.63.
GM's 8.375 percent bond due in July 2033 lost 1 cent to 18 cents on the dollar yesterday, pushing the yield to 46.3 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Ford's 7.45 percent bond due in July 2031 dropped 1.5 cents to 24.5 cents on the dollar, yielding 30.5 percent.
`Change Their Minds'
Democrats ``may change their minds'' on their demand for where the automaker aid comes from as the end of the legislative session looms, Tennessee Republican Senator Bob Corker said.
Senator Carl Levin of Michigan, who helped write the Democratic legislation, said he is open to alternatives.
``We need to see language of people who have different paths to the common goal, so we can try to reconcile them,'' he said.
GM's Wagoner told Dodd's committee yesterday the U.S. economy would suffer a ``catastrophic collapse'' if domestic carmakers fail. Three million jobs would be lost within the first year, personal income would drop by $150 billion and government tax losses would total $156 billion over three years, he said.
GM needs $10 billion to $12 billion, according to Wagoner, Ford needs $7 billion to $8 billion, said Mulally, and Chrysler is seeking $7 billion, Nardelli told the panel. Chrysler burned $3 billion in cash in the third quarter and had $6.1 billion remaining at the end of the period, Nardelli said.
`Most-Mismanaged'
GM is the ``most-mismanaged of the three, with the most problems of the three,'' Maryann Keller, an automotive consultant in Greenwich, Connecticut, said today in a Bloomberg Radio interview.
A first-quarter 2009 bankruptcy of the automakers could cause U.S. gross domestic product to shrink by at least 4 percent as U.S. auto production would slide by 30 to 35 percent, according to an analysis released today by Deutsche Bank economist Joseph LaVorgna. Unemployment would jump to between 8 percent and 8.25 percent, the analysis showed. The rate currently is 6.5 percent.
Senator Richard Shelby of Alabama, the committee's top Republican, said the panel must determine the long-term outlook of automakers before deciding on the aid.
``Is $25 billion enough?'' Shelby said. ``Is this the end or just the beginning?'' He later told the auto chiefs, ``A lot of people think you already failed, that your model has failed.''
Pledge for Profits
When Shelby asked how the loans will be repaid, Nardelli replied, ``We will generate profits.''
Senator Charles Schumer, a New York Democrat, said automakers are ``too vital to let fail,'' though he was concerned they would be back in months to seek more dollars unless Congress requires an industry overhaul. ``We need a business model based on cars of the future.''
Senator Jim Bunning, a Kentucky Republican, said the Democratic aid plan ``is not a serious one'' and is ``virtually a blank check'' that doesn't require concessions.
``You're going to come back for more,'' Corker told the automakers.
Dodd told automaker chiefs their compensation packages ``are pretty rich'' and that they should take steps to voluntarily rein them in since they're asking for taxpayer aid.
Wagoner got $14.4 million in compensation in 2007, including a salary of $1.56 million, an incentive bonus of $1.8 million and ``other pay'' of $697,358. He also recorded $6.34 million in stock and stock option awards and an increase in his pension value of $4 million.
Mulally received $21.7 million for 2007, including $2 million in salary, $7 million in bonuses, $11.2 million in stock options and awards and $1.4 million in ``other pay.''
Chrysler, which is closely held, hasn't disclosed Nardelli's pay.
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