U.S. Carmakers Said to Seek $50 Billion in U.S. Loans
General Motors Corp., Ford Motor Co. and Chrysler LLC, strapped for cash as sales plunge, are seeking $50 billion in federal loans to help them weather the worst auto market in 25 years, a person familiar with the matter said.
The package would be $25 billion for health-care spending and $25 billion for general liquidity that could be delivered in different ways, including short-term borrowing from the Federal Reserve, said the person, who asked not to be identified because the plan isn't public. In return, the companies would be willing to take steps such as granting stock warrants, the person said.
The automakers should receive ``additional help'' from President George W. Bush's administration, Senate Majority Leader Harry Reid said after meeting with their chief executive officers in Washington yesterday. The auto executives also met with House Speaker Nancy Pelosi, a California Democrat.
``One of the things we've been talking to them about is if things really degraded dramatically in the economy, more than they are today, would it be appropriate for us to have like a bridge loan that allows us to get through this,'' Ford CEO Alan Mulally said in an interview today.
The three companies, their unions and legislative allies are hunting for aid after a combined $28.6 billion in combined first- half losses. New vehicles sold at a seasonally adjusted annual rate of 10.6 million in October, the lowest since 1983.
Ford is also among automakers approaching European governments for 40 billion euros ($51 billion) in loans, Chief Financial Officer Lewis Booth told reporters today after the company posted a $2.98 billion third-quarter operating loss and said it used up $7.7 billion in cash.
GM said today it may not have enough cash to keep operating this year. The automaker reported a $4.2 billion third-quarter operating loss and said it used up $6.9 billion in cash.
Rick Wagoner, GM's chief executive officer, said in an interview he's confident that when government officials see ``the clarity of the challenges being faced that we'll get the support that's necessary.''
GM fell 44 cents, or 9.2 percent, to $4.36 at 4:15 p.m. in New York Stock Exchange composite trading. Ford rose 4 cents, or 2 percent, to $2.02.
``Four or five'' options are being considered for automakers, House Majority Leader Steny Hoyer told reporters in Washington today. Those include allowing some of the $700 billion for the financial-system rescue plan to be used to aid the automakers' financing arms, said Hoyer, a Maryland Democrat.
Automakers' needs weigh into the consideration of whether Congress will hold a post-election session the week of Nov. 17 to consider stimulus legislation, Hoyer said. The prospect of a session isn't yet clear because Bush hasn't said whether he would sign a stimulus bill, Hoyer said.
The Bush administration should use its existing authority to provide help to the automakers, Reid said yesterday in a statement, without being specific as to the amount. Congress will also continue exploring ways to aid the companies, the Nevada Democrat said.
``We have great concern for the health of the auto industry,'' White House spokesman Tony Fratto said at a press briefing today.
The Bush administration already has authority to supply direct loans to automakers, Representative Sander Levin, a Michigan Democrat, said in an interview today.
``They don't yet seem to have the same sense of the crisis that's facing all of America,'' Levin said.
President-elect Barack Obama said today that policy options to help the auto industry ``weather the financial crisis'' will be a ``high priority'' for his transition team.
``I've asked my team to explore what we can do under current law and whether additional legislation will be needed,'' Obama said at a news conference in Chicago.
Spokesmen for the automakers and the CEOs haven't said how much assistance they're seeking. The UAW said Nov. 5 it backed $25 billion in loans for automakers' health-care costs and other aid for ``immediate liquidity.''
Wagoner, Mulally, Chrysler's Robert Nardelli and United Auto Workers President Ronald Gettelfinger didn't take questions from reporters while in Washington yesterday for their meetings.
Nardelli said in a statement after the meetings that Chrysler was ``encouraged'' by the lawmakers' understanding of the importance of the auto industry.
The government wants to ``ensure the viability of this industry,'' Pelosi told reporters yesterday. U.S. officials also will be ``looking out for taxpayers,'' she said.
Automakers, the UAW and state political leaders have sought support from the Energy Department, the Fed, the Treasury Department and from Congress.
The Energy Department said Nov. 5 it has moved ahead with one piece of automaker aid as it set the interim rules for the $25 billion low-interest loan program, which was crafted to help the companies retool plants to build more-efficient vehicles.