Lawmakers demand answers from Big Three

WASHINGTON — In just 10 days, Detroit's Big Three automakers hope to re-plead their case for a $25 billion emergency loan. But this time they will be expected to produce clearer business plans.

Friday, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., sent the automakers a letter calling on them to submit "a credible restructuring plan" by Dec. 2.

The letter comes after Congress refused to vote Thursday on carving the loan out of the $700 billion financial rescue plan.

President Bush, in his weekly radio address, castigated Democrats for failing to vote on an alternative proposal to let automakers instead tap $25 billion in loans that are supposed to help them improve the fuel efficiency of their cars.

"If the automakers are willing to make the hard decisions needed to become viable, they should be able to receive the funds Congress already allotted to them for other purposes," Bush said. "The American people expect their elected leaders to do what it takes to solve it."

Pelosi and others have said there was not enough support in Congress to provide funding absent a detailed turnaround plan.

Pelosi and Reid laid out a number of requirements for a restructuring plan that would generally answer three questions:

1. How will the $25 billion be spent and paid back?

In testimony this week, the automakers told Congress they intend to split the $25 billion emergency loan roughly along the lines of their share of the U.S. market. GM, being the largest, would get $10 billion to $12 billion. Ford and Chrysler would take between $7 billion and $8 billion each.

Asked by Sen. Richard Shelby, R-Ala., how they intended to pay back the loan, Chrysler chief executive Robert Nardelli said the automakers hoped the money would buy them time to transform their businesses.

"We wouldn't be here today asking for this, if we didn't have a high confidence level that we could weather this economic trough, continue to resize, make these gut-wrenching decisions to come out the other side leaner, more agile, and for us, a higher quality, higher reliable product," he said.

Yet some industry analysts said GM alone may need as much as $30 billion next year to deal with a potential cash shortfall. Pelosi and Reid are asking the automakers to provide "documented assessments" of their current financial positions and outline their plans for meeting health care and pension obligations. They want estimates for when the loans would be repaid under varying auto sales conditions.

Some analysts say the automakers also need to work on their marketing pitches, recalling the assertive spirit of former Chrysler chief executive Lee Iaccoca, who persuaded Congress to bail out Chrysler in 1979.

"He was much more a salesman," said Bruce Belzowski, an associate director at the University of Michigan's Transportation Research Institute. "When he went before Congress he was excited and emotional about what he was going to do ... What a great show for just a $1.5 billion loan."

2. How will the automakers demonstrate accountability?

Congress wants to see that the auto industry is willing to make sacrifices if it accepts government aid. Some lawmakers cringed when Ford chief executive Alan Mulally refused to cut his salary to $1 like Iacocca, saying, "I think I'm OK where I am." And flying three separate private jets to Washington to testify enraged Rep. Gary Ackerman, D-N.Y.: "I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here? It could have at least sent a message that you do get it."

The United Auto Workers will likely need to make some "visible indication of sacrifice" to push forward the automakers' plans, said Dave Cole, chairman of the Center for Automotive Research. A special program that pays workers at idle plants may be the first on the chopping block. "Symbolically, it's something everyone hates," Cole said.

Both Ford and GM made some headway Friday, announcing production cuts at several plants to better align with demand. GM is preparing to give back two of its leased corporate jets, and Ford is exploring the sale of its five planes.

3. Is the industry viable?

This is perhaps the most important question facing Congress. Pelosi and Reid want the companies to explain how they intend to remain solvent while retooling to become global leaders in the production of energy efficient vehicles.

GM chairman and chief executive G. Richard Wagoner Jr. attempted several times in his recent testimony to convey his company's commitment to make car more fuel efficient.

"We have 20 models that get more than 30 miles per gallon highway, more than twice any other manufacturer today," Wagoner said. "We have six hybrid models. We'll offer three more next year. We're the global leader in biofuel vehicles. And obviously we have a significant commitment to the electric vehicle with cars like the Volt and Fuel Cell."

But lawmakers want further assurances. In their letter, Pelosi and Reid asked the automakers to demonstrate their ability to meet new fuel standards of at least 35 miles per gallon by 2020.

This request may be the easiest to comply with.

"All these companies have very detailed plans and strategies in place. It's there. It's on paper. It's in action," said Laurie Harbour-Felax, a longtime industry analyst.

GM is making strides to streamline its manufacturing, much like Toyota's production system, she said. All three companies have plans to roll out fuel-efficient and hybrid electric vehicles in two years.

Staff writer Dan Eggen contributed to this report.

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