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Carmakers 'affect entire economy' Carmakers 'affect entire economy'
(10 minutes later)
The chairman of the Senate committee deciding whether to rescue the Detroit Three carmakers has said the health of the entire US economy is at stake.The chairman of the Senate committee deciding whether to rescue the Detroit Three carmakers has said the health of the entire US economy is at stake.
Democrat Christopher Dodd said that letting Chrysler, General Motors or Ford fail would be playing "Russian roulette with the entire economy".Democrat Christopher Dodd said that letting Chrysler, General Motors or Ford fail would be playing "Russian roulette with the entire economy".
Failure would affect "almost every sector of the economy", he said.Failure would affect "almost every sector of the economy", he said.
He also severely criticised the US Treasury and financial institutions for their handling of the credit crisis.He also severely criticised the US Treasury and financial institutions for their handling of the credit crisis.
"This is not about acting to save individual companies. If it were, I would let them fail," said Sen Dodd, who chairs the Senate Banking Committee."This is not about acting to save individual companies. If it were, I would let them fail," said Sen Dodd, who chairs the Senate Banking Committee.
With "hundreds of billions in outstanding debt obligations", he said the credit crisis would get a lot worse if the carmakers were not able to repay their debts.With "hundreds of billions in outstanding debt obligations", he said the credit crisis would get a lot worse if the carmakers were not able to repay their debts.
Inaction, he said, "is simply not a solution."Inaction, he said, "is simply not a solution."
Rounding off his opening salvo, the senator said the US was mired in a deep recession caused by "irresponsible actions in the financial sector", before criticising the Treasury Department for "misusing" its authority by spending the $700bn bail-out package agreed by Congress in an "ad hoc manner".Rounding off his opening salvo, the senator said the US was mired in a deep recession caused by "irresponsible actions in the financial sector", before criticising the Treasury Department for "misusing" its authority by spending the $700bn bail-out package agreed by Congress in an "ad hoc manner".
We're here today because we made mistakes Rick Wagoner, General Motors chief executiveWe're here today because we made mistakes Rick Wagoner, General Motors chief executive
The authorities had not, he said, attached stringent enough conditions to the package.The authorities had not, he said, attached stringent enough conditions to the package.
The same mistakes must be made with the carmakers, he urged. The same mistakes must not be made with the carmakers, he urged.
The committee should determine the answers to three questions during Thursday's session, Mr Dodd said:The committee should determine the answers to three questions during Thursday's session, Mr Dodd said:
  • Are the carmakers in "dire straits"?
  • If they fail, what are the consequences for the wider economy?
  • And if the consequences are severe, does the government have the responsibility to help?
  • Are the carmakers in "dire straits"?
  • If they fail, what are the consequences for the wider economy?
  • And if the consequences are severe, does the government have the responsibility to help?
All three bosses were heavily criticised after their last hearing in Congress, which was largely overshadowed by the fact that all three used separate private jets to fly to Washington.All three bosses were heavily criticised after their last hearing in Congress, which was largely overshadowed by the fact that all three used separate private jets to fly to Washington.
This time, GM chief executive Rick Wagoner and his counterpart at Ford, Alan Mulally, drove to Detroit in hybrid cars produced by their own respective firms.This time, GM chief executive Rick Wagoner and his counterpart at Ford, Alan Mulally, drove to Detroit in hybrid cars produced by their own respective firms.
Mr Wagoner admitted in a prepared testimony: "We're here today because we made mistakes."Mr Wagoner admitted in a prepared testimony: "We're here today because we made mistakes."
Loan proposalsLoan proposals
Earlier this week, Chrysler, Ford and General Motors submitted their proposals to Congress for multi-billion-dollar loans upon which their survival could depend.Earlier this week, Chrysler, Ford and General Motors submitted their proposals to Congress for multi-billion-dollar loans upon which their survival could depend.
The price tag has jumped from $25bn to $35bn in just two weeks. Why? Richard Shelby, Republican senatorThe price tag has jumped from $25bn to $35bn in just two weeks. Why? Richard Shelby, Republican senator
Slashing costs, reducing levels of debt and investing in greener technologies form the centre-piece of each proposal.Slashing costs, reducing levels of debt and investing in greener technologies form the centre-piece of each proposal.
The chief executives of Ford and GM have even offered to work for $1 a year if Congress approves the emergency aid.The chief executives of Ford and GM have even offered to work for $1 a year if Congress approves the emergency aid.
The so-called Detroit Three of troubled US carmakers have asked for a combined total of $34bn (£22.8bn; 26.8bn euros).The so-called Detroit Three of troubled US carmakers have asked for a combined total of $34bn (£22.8bn; 26.8bn euros).
  • General Motors asked Congress for a loan of $12bn, with an additional $6bn if necessary, to help it survive.
  • General Motors asked Congress for a loan of $12bn, with an additional $6bn if necessary, to help it survive.
  • Ford requested a $9bn bridging loan, which it hopes it will not need.
  • Chrysler sought $7bn to survive the dramatic slump in sales that has decimated its cash reserves.
  • Ford requested a $9bn bridging loan, which it hopes it will not need.
  • Chrysler sought $7bn to survive the dramatic slump in sales that has decimated its cash reserves.
    • At the last hearing two weeks ago, they asked for $25bn.At the last hearing two weeks ago, they asked for $25bn.
    Republican senator Richard Shelby questioned the big rise in the amounts being asked for.Republican senator Richard Shelby questioned the big rise in the amounts being asked for.
    He also queried the "optimistic sales forecasts" on which the carmakers had based their timescales for repaying the loans.He also queried the "optimistic sales forecasts" on which the carmakers had based their timescales for repaying the loans.
    Avoiding criticismAvoiding criticism
    GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who may be more sympathetic to industry pleas - takes office in in January.GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who may be more sympathetic to industry pleas - takes office in in January.
    But Republican critics and some Democrats say the financial crisis is not the only reason why the biggest US carmakers are in trouble.But Republican critics and some Democrats say the financial crisis is not the only reason why the biggest US carmakers are in trouble.
    They say that Ford, GM and Chrysler's production is inefficient, and that their labour costs are higher than many of their foreign rivals.They say that Ford, GM and Chrysler's production is inefficient, and that their labour costs are higher than many of their foreign rivals.
    The Bush administration has offered to accelerate the payment of some $25bn in green investment credits already allocated to the car industry, but this has been opposed by Democrats in the House of Representatives.The Bush administration has offered to accelerate the payment of some $25bn in green investment credits already allocated to the car industry, but this has been opposed by Democrats in the House of Representatives.