Pelosi Heads To Detroit on Economic Mission

House Speaker to discuss financial status of auto industry

View Comments (
)
|
Email
|
Print

    NEWSLETTERS

    TK
    Getty Images
    Speaker of the House Nancy Pelosi heads to Detroit

    The chief executives of

    Detroit

    's automakers and the head of the United Auto Workers plan to meet with House Speaker Nancy Pelosi on Thursday to discuss the financial status of the struggling industry.

     

    Two people familiar with the plans for the meeting said Wednesday that the top executives of General Motors Corp., Ford Motor Co. and Chrysler LLC, along with the union's president, will meet with Pelosi in

    Washington

    to talk about the credit crisis and access to government funding for the auto industry.

     

    The officials spoke on the condition of anonymity because the meeting is private.

     

    Pelosi has called for Congress to enact a stimulus program to shore up the sinking economy during its lame-duck session.

     

    News of the meeting came as Detroit automakers and their allies in Congress said Barack Obama's victory could help automakers line up federal funding needed for them to survive a terrible economic slump.

     

    Obama made it clear during his campaign that he understood the automakers' problems and would work to preserve the industry, U.S. Sen. Carl Levin, D-Mich., said Wednesday.

     

    "I'm very optimistic that we're going to have a fighter in the White House for manufacturers, and that's what we need," Levin said.

     

    Levin said he was told Wednesday by Jason Furman, Obama's senior economic adviser, that government aid is atop Obama's agenda. Levin said Furman did not commit to a specific funding path for the industry but was supportive.

     

    Obama has said he would meet with industry leaders and the United Auto Workers immediately to talk about helping automakers, but a meeting has not yet been scheduled.

     

    Levin noted that Obama expressed support for doubling an Energy Department loan program for automakers to develop fuel-saving technology to $50 billion from $25 billion.

     

    Michigan

    's other senator, Democrat Debbie Stabenow, said Senate Majority Leader Harry Reid, D-Nev., appears open to supporting another $25 billion in flexible funding.

     

    Reid, she said, appeared open to supporting "whatever we feel is the best approach for the auto industry and can get the consensus in the House to pass."

     

    Levin said members of

    Michigan

    's congressional delegation would pursue options to help the industry, including the $700 billion Wall Street bailout or access to Federal Reserve capital.

     

    On Wednesday night, the Department of Energy released rules for getting the $25 billion in loans that could get money into automakers' hands by the end of the year.

     

    Obama's victory over Republican John McCain came just three days before General Motors Corp. and Ford Motor Co. are to release their third-quarter results, which almost certainly will show billions in losses and cash burn rates that will push the companies closer to emptying their treasuries if auto sales don't bounce back soon.

     

    Further job cuts by both automakers are expected on Friday. Analysts say GM could close more plants but Ford has said it will likely do temporary factory shutdowns and overtime cuts at some of its car plants. Some new engines and models will be delayed.

     

    Troy Clarke, GM's president for North America, said in remarks prepared for a speech Wednesday night in

    Detroit

    that the next 100 days are critical for GM and the auto industry.

     

    The company, he said, made cuts to save cash earlier this year, but more are coming.

     

    "I'd like to say we're done, but once again, market and economic conditions have continued to decline," he said in a text of the speech provided by GM. "We must be adaptable and ready to make needed changes quickly, particularly over the next 100 days."

     

    GM is talking with Chrysler majority owner Cerberus Capital Management LP about GM acquiring Chrysler. GM reportedly is after Chrysler's roughly $11 billion in cash and is seeking federal aid to make the deal happen.

     

    A person briefed on the GM-Chrysler talks said Wednesday that no announcement of a deal is imminent because much of it hinges on federal aid. The person asked not to be identified because the talks are private.

     

    A further indication of GM's woes came Wednesday when its auto financing arm, GMAC Financial Services, reported a $2.52 billion third-quarter loss. GMAC is 51 percent owned by private equity firm Cerberus, while Detroit-based GM holds the rest.

     

    Also Wednesday, House Speaker Nancy Pelosi again called for a lame-duck session of Congress to enact a stimulus program to shore up the sinking economy. It was unclear whether aid for the troubled automakers would be part of that package.

     

    Automakers say some sort of government funding is necessary to bail out the troubled industry. They have been lobbying to speed up loans from the Energy Department pot, and for access to part of the $700 billion Wall Street bailout plan and perhaps other funding.

     

    Also on Wednesday, the Center for Automotive Research published a report estimating that about 2.5 million jobs across the economy would disappear in the first year if the auto industry shrinks by 50 percent.

     

    Only 239,000 of those job losses would be at the Detroit Three - the remainder would be at parts suppliers and related industries, the Ann Arbor-based center said.

     

    Cerberus Chairman John Snow said Wednesday that Obama needs a bipartisan plan to counter the worst economic downturn in about 50 years.

     

    "What we need is to make sure that a vital industry like autos ... which is such a big part of the overall economy, doesn't lead us into a deeper and harsher downturn," Snow, who served as treasury secretary under President George W. Bush from 2003 to 2006, said in an interview on the CNBC cable channel. "The collapse of the auto industry at this time would be devastating for a new president."

     

    GM is burning through more than $1 billion per month and analysts have said the company could reach the minimum cash levels required to operate sometime next year. They say Chrysler could go into bankruptcy next year if it doesn't take on a partner or isn't acquired by another automaker, raising the specter of tens of thousands of lost jobs or the need for the government to take over the company's pension obligations.

     

    GMAC has said it is having discussions with federal regulators about becoming a bank holding company, a move that could help it access government funding and be part of a potential acquisition of Chrysler.

     

    A GM-Chrysler deal could lead to job cuts of 24,000 to 35,000, according to industry analysts. They have predicted GM could close half of Chrysler's 14 manufacturing plants and consolidate engineering, design, finance and other operations. Another 50,000 auto supplier jobs could also be lost.

     

    Most of the losses would be in

    Michigan

    , but analysts say the alternative of Chrysler being sold in pieces would result in many more job cuts than a GM acquisition.