Auto CEOs Tell Congress Why They Need $25b

Associated Press

Transcript

maybe I'm denser so mr. wagon I don't quite understand what the hell you just told me can you just tell me in absolute terms how much money do you need to survive General Motors from today until March 30th Carson is going to pinned on what happens with suppliers in large ice I understand it give me your worst-case scenario the worst-case scenario the amount of money would be significant I mean we have we have supplier what is significant work/live billion dollars every month so you so what you're telling us that since you anticipate borrowing fifteen to eighteen billion dollars under this authorization you'll be if the market doesn't turn around and the economy doesn't recover by that time and I think you have to be your wishful thinkers I think it will by March 30th you're out of money is that correct the analysis that we've done is based on an assumption that the US market continues that about the current rate which is weak level we don't assume a lot of recovery we don't we hope it won't get worse I own that basis we would with the amount of funding that proportionally would presumably be allocated to us we think we have a good shot to make it through next year the overall amount and cost of financing the restructuring would be significantly higher in a chapter 11 process than the working capital bridge that we're requesting here today and finally we cannot be confident that we'll be able to successfully emerge from bankruptcy we at Ford are hopeful that we have enough liquidity but we also must prepare ourselves for the prospect of further deteriorating economic conditions in 2009 in addition the collapse of one of our competitors would have a severe impact on Ford and our transformation plan because the domestic auto industry is highly interdependent it would also have a devastating ripple effect across the entire US economy

Auto City Profile: Uncertain Future

Associated Press

Transcript

it's a dot on a map in northeastern ohio that's in danger of being erased completely lordstown is a village of 3600 people that revolves around this plant it's here where some of gm's most marketable cars are made but with the auto giant facing a major financial crisis there are fears that this place may wither away if the plant closes i think lordstown will be a ghost town there's not much out here there's you know basically the plant a few other businesses out here that the plant deals with there's already talk of layoffs circulating and here at this bowling alley the talk is centered on a worst case scenario well here's ed saying last one out shut off the lights it would be devastating to our this whole area because you know we all gm packard we all work for them more people in fact work at this plant than live in the town itself and officials speculate that if gm closed it down or it went under the town would lose up to 70 percent of its budget and that's why they seem incredulous that congress hasn't passed a financial package yet to help out the big three if they don't get the if they don't get the loan it's i don't even want to think what's going to happen locally shutting down our plant would be devastating nationally shutting down general motorsport and chrysler are going to affect about 3 million people directly indirectly the ripple effect is going to be astronomical it has to happen it's probably going to have to have stipulations and conditions with it but it needs to they need to they need to do something and she's not even a gm employee teresa goldman instead runs this place a and j's country cafe she says she relies on gm for 80 percent of their business she says she was hurt when the plant temporarily did without one of its shifts and she shudders to think what would happen if it closed completely this plant would have to close it's going to devastate this area it's going to devastate all the businesses the school systems everything for now though they admit there is little they can do except go to work and hope for the best diane kepley the associated press

Automakers Testify As Hopes for Aid Falter

Associated Press

Transcript

as the heads of General Motors Ford and Chrysler pleaded for Relief on Capitol Hill hopes of passing a bill to rescue Detroit's big three automakers dimmed in sometimes contentious testimony GM CEO Rick Wagner was pressed on what steps the industry is taking to shore up operations and when his company would run out of money if the loans weren't extended can you just tell me an absolute terms how much money do you need to survive General Motors from today until March 30th I Congressman it's going to depend on what happens with suppliers in markets I I understand it give me your worst case scenario the worst case scenario the amount of money would be significant I mean we have we have supplier four5 billion every month President George W bush and republicans in Congress have been reluctant to use the treasury Department's $700 billion Financial bailout program to finance the loans saying the funds were targeted to the financial industry not struggling corporations Wagner told the house Financial Services committee that the collapse of the US Auto industry could lead to a loss of 3 million jobs within the first year a Senate vote on an automotive bailout plan which would also extend jobless benefits could come as early as Thursday but it clearly lacks the necessary support to advance Sandy coel the Associated Press

Dow Falls Below 8,000, S&P at 5-year Low

Associated Press

Transcript

the Dow closed below the 8,000 mark Wednesday a level not seen since 2004 stocks finished at their lows of the session after heads of the big three automakers pleaded for Relief during a second day of hearings in Washington the struggling companies are asking for a massive infusion of cash to prevent the potential of millions of layoffs and Stave off bankruptcy economic worries weighed heavily on the market including a bleak Outlook from the Federal Reserve and the worst numbers on consumer prices in more than 60 years CPI came in the lowest in 61 years I mean it shows more deflation and I think most economies would rather see inflation because when inflation at least your assets go up your home value goes up and other things with deflation everything goes down the Dow finished down 427 points at 7,997 the S&P 500 Index lost more than 52 points to 86 and the NASDAQ lost 97 points to finish at 1386 stocks have been trading erratically for weeks as investors are trying to gauge the direction of the economy analysts expect the volatility to continue for some time to come Mark hamr the Associated Press

Reid Lowering Expectations for Auto Bailout

Associated Press

Transcript

it's important to understand that the authority to provide funds to the Auto industry lies with the treasury Department the Federal Reserve can also provide These funds as the Senate considers whether to pass an auto Aid package either in this legislation or in other legislation we all need to remember that we're simply deciding whether Congress will apply additional terms to the funds that the Trad Department can and should ultimately provide in fact Mr President Congress need do nothing treasury can put whatever restrictions they choose on that so I hope that we can pass legislation to Aid the Auto industry this next day or two that uh if we can't do it here legislatively I would hope that the Secretary of Treasury would listen long and clear because they could take this into their own hands and do what I think is appropriate from their perspective

Author Chronicles Fiscal Insanity

CBS

Transcript

best-selling author Michael Lewis has been called America's Funniest serious writer his new book is panic the story of modern Financial insanity and he's here to talk about it good morning Michael good morning so you chronicled information on the five most recent Financial crises in our history and came up with this yes well you know I worked on Wall Street in there in the mid 80s and it was the beginning really of this process I think that we're coming to the end of now this period of incredible Financial turmoil and and you know with stock market crash in 1987 the the internet bubble boom and bust the the collapse of long-term Capital Management this supposedly threatened capitalism as we knew it now we've got the subprime crisis when you studied these what was the Common Thread well at the bottom of it all is financial essentially a financially unsustainable behavior in this country I mean it is it's people borrowing lots of first the government and then individuals taking on more and more and more debt and in a way that it just it it you know it's not going to end well this is essentially kind of an insecurity at the bottom the financial system because people are behaving in a way that they can't they cannot sustain if it sounds sounds too good to be true it is yeah yeah it well well yes eventually and now but now I think we've come to this Terminus I mean this is different than the other panics we were we were weirdly lulled into this sort of weird sense of uh security because there as as tumultuous as the financial system has been it never really seemed to matter very much right and you know that we always came back we always came back and in Impact in fact I think part of the reason we came back is that um the Federal Reserve pumped lots of money into the system to bring us back which led to another bubble the housing bubble but this this bubble is I mean it's different from the other ones I mean this is something that we're not we're dealing with kind of essential insolvency here and and so there's going to be a real sorting out I think we're going to this period in history that is unlike anything any of us have ever lived through it may not be called a depression but I think psychologically it will be experienced as such because it will be for the first time in their lives a lot of people of people of grown-ups they're going to experience it's uh a financial decline serious Financial decline what do you think about everybody wants a piece of it well they don't really make much sense to me uh I mean historically like the automobile companies I'd rather give the 10 billion dollars to you than to GM yeah I'd rather you give it to me but I mean we give it to GM and what are they gonna do they're just going to make cars they can continue making cars people aren't going to buy uh that's not what they say that's but but that you people don't change unless they're forced to change right and what they're doing it's like enabling an addict to give them money uh the the the banks it's even it's a little weirder I mean when the treasury asks for the 700 billion dollars they said what they were going to do with this buy Bad Mortgages then they got the money and said oh we're not gonna do that right in a matter of weeks they say we're not going to do that or we're going to put invest the money in the banks now I guess the idea is you give the money to the banks so that they can make smart loans but the criteria for getting this money is to have been a bank that made so many stupid loans that you're basically bankrupt and so it doesn't seem like you're giving it to the even to the right people now now there's something to be said for doing something I mean but it should be the right thing but it should be the right thing and I think it's probably a good thing that a new Administration is coming in and they can clean up someone it's sort of they're now in the position of cleaning up someone else's problem rather than rather than their own I think it's they may be a little bit more Integrity to the process well hopefully they can learn from our past mistakes and from reading your book Michael Lewis thank you so much thanks for having me

Big 3 Looking For A Lift

CBS

Transcript

the heads of the big three automakers are back on Capitol Hill for a second day today begging for billions in financial aid CBS News senior White House correspondent Bill plant joins us good morning Bill good morning Maggie the nation's struggling automakers say that they need a $25 billion loan to keep them from bankruptcy but they're not getting much sympathy either here at the White House or up on Capitol Hill we just can't be confident that we'll be able to successfully emerge from bankruptcy Congress has already already voted $25 billion to build fuel efficient cars the automakers would like that amended so they can use the money to stay in business but it's A Hard Sell they are seeking treatment for wounds that I believe to a large extent were self-inflicted the White House is opposed to taking any money for car makers from the $700 billion bailout bill they want the money that's already been appropriated and they want an additional 25 billion billion dollars which we think is unnecessary and unreasonable at this point the Los Angeles Auto Show opens today today with no new models from GM or Chrysler and suppliers to the big three warn that bad business means a ripple effect of lost jobs we just are closing a plant in Kansas that will be approximately 700 people on the other side of the capital angry house Democrats challenged treasury secretary Hank pson will the homeowners be helped what are we going to do about Main Street not just Wall Street they're upset that pson decided not to use some of the bailout cash to buy up Bad Mortgages when the facts changed and the circumstances changed we changed the strategy we didn't Implement a flawed strategy we implemented a strategy that worked Democrats are now pushing for another mortgage relief program and the automakers well they continue testifying today and we're told that the CEO of Ford plans to arrive up on the hill in his company's latest hybrid vehicle maybe that'll help Maggie CBS yes's Bill plant thank you Bill joining us now from Capitol Hill Congressman Barney Frank chairman of the house Financial Services committee along with Senator Richard Shelby the top Republican on the Senate Banking Committee good morning gentlemen good morning let me begin with you Senator Shelby yesterday you asked whether these automakers would use the money that they're asking for to improve their business models or if this was just life support having heard from them now for a whole day what do you think the answer is well I think a lot of it would be life support I don't believe that they have uh uh immediate plans to change their model which is a model of failure I wish that they would uh I know they're in dire circumstances but you know somebody has to speak up for the taxpayer we know that we would like for them to be saved I believe their best option would be some type of chapter 11 uh bankruptcy where they can renegotiate get rid of the management these people have been the leaders and of failure and they need to go congressman Frank they say the automakers say that bankruptcy would cost cost them a lot more than 25 billion in the long run what do you say that bankruptcy would be very bankruptcy would be very disruptive bankruptcy is a favorite spectator sport for uh politicians and experts we don't have to engage in it you have a whole network of suppliers small businesses and others who would get stiffed to use the legal term in a bankruptcy um there was also an assumption that if you did bankruptcy you can undo labor contracts now the unions to their credit have negotiated some concessions but you know we already have too much union busting and too much income inequality for the average worker in this country for us to now say by the way if you're a company and you haven't been able to totally get rid of the unions then go bankrupt and rewrite and write down the contracts as to this 25 billion no it's not in itself going to change it's a loan with the federal government in the first position to be repaid ahead of the shareholders and the bond holders and everybody else and if by March 31st they have not filed the plan to the president's satisfaction that shows how they're going to become more energy efficient and how they going improve marketability the 25 billion has to be paid back while 25 what if they've used it well we are in first position they're not going to have nothing whatsoever we we are in a position where we get anything that's left of those three companies that's what it means to be in the first position they also During the period will not be able During the period the loan is extended they can't pay dividends they can't pay bonuses to anybody who makes more than 200,000 the alternative that the Administration has put forward is to take 25 billion they've already been voted for the sole purpose of becoming more energy efficient and taking away those restrictions which would be terrible idea okay Senator Shelby let's say for argument sake that these wounds were self-inflicted as we heard Chris Dodd say should we Overlook that for the greater good and give them the money anyway so that we don't feel the Ripple effects no ma'am we should not give them the uh the money anyway uh this would probably just be the first batch that is 25 billion I I they have gone through they've burned over a hundred billion dollar uh as they say trying to turn these companies around I wish wish they could but I don't believe this money will be paid back I don't believe it'll be 25 billion I believe it'll be 100 billion it will just uh prolong the agony these companies are failures now unless we get rid of the management get rid of the business model we're wasting a lot of taxpayers money we shouldn't have to go down that road Senator Shelby congressman Frank I thank you both for your [Music] time

Paulson Defends $700 Billion Bailout

VOA News

Transcript

when the US housing market collapsed so did some firms that had invested heavily in mortgage back Securities the bush administration's $700 billion troubled assets relief program or tarp was supposed to fix the problem by buying up Bad Assets but treasury secretary Henry pson said conditions have changed in September before economic conditions worsened $700 billion in troubled asset purchases would have had a significant impact but half of that sum in a worse economy simply isn't enough Firepower pson has only received the first installment $350 billion he told members of the House Financial Services committee that most of the money will be used to buy Bank stocks pson says injecting cash into troubled banks will improve their ability to start lending money again I think there's a lot of work that's still needs to be done in terms of recovery of the financial system getting it working again getting it accredit flowing again I think this is going to be key to getting the economy going but some Democrats say the new plan does nothing to stem the rising tide of foreclosures congresswoman Maxine Waters expressed dismay the fact that um you Mr pson took it upon yourself to absolutely ignore the authority and the direction that this Congress had given you just amazes me but some applauded polson's flexibility among them Republican Congressman Spencer bckas conditions on the ground change and you must be agile and adjust and uh I hope we all understand that Federal Reserve chairman Ben banki agreed with pson saying Capital injections would help restore confidence and stability but Sheila be the head of the FDIC which ensures Bank deposits broke with the administration and recommended $24 billion of bailout money to help American households avoid foreclosure we all know there's no single solution or Magic Bullet but as forclosures escalate we're clearly falling behind the curve much more aggressive intervention is needed if we are to curb the damage to our neighborhoods and to the broader economy pson said he doesn't plan to initiate another Capital injection once the first installment of $350 billion is used up that means the incoming administration of president-elect Barack Obama will decide how the remaining funds will be spent milar Sega vaa news

US Auto Companies Ask for Money

VOA News

Transcript

collect our funds top Executives of the big three automakers in the United States tried to convince a group of senators Tuesday that the global financial crisis is contributing to their problems but Senate banking committee chairman Christopher Dodd told them they could not say they did not see this coming because their companies have been struggling for years DoD said the automakers have failed to adapt to change and now everyone is paying the price they've been content in my view to not only satisfy but in too many in too many respects Drive the demand for inefficient gas- powered vehicles that Americans have been going broke to gas up they derided hybrid vehicles as making quote no economic sense unquote they have dismissed the threat of global warming the role played by their products in creating it and the strong desire for the American people to do something to stop it Congressional Democrats want to use the money from the recently approved $700 billion economic stimulus plan to give loans to the car makers but Senate Republicans and the Bush Administration are opposed they say the automakers should use a previously approved $25 billion loan from the energy Department that was meant to help them build more fuele efficient vehicles the three Executives say if one of the automakers goes out of business it will affect them all and will damage the US economy the CEO of General Motors Richard Wagner said the failure of the Auto industry would be catastrophic resulting in the loss of millions of jobs I do not agree with those who say we are not doing enough to position GM for Success what exposes us to failure now is not our product lineup is not our business plan is not our employees and their abing willingness to work hard is not our long-term strategy what exposes us to failure now is the global financial crisis but Republican critics say the financial crisis is not the only reason the auto comp compes are in trouble they say production is not efficient and labor costs are higher than those of many foreign car companies Ford motor chairman Alan mulele says the company has been restructured to generate more income we have reduced production we have further reduced employment we have eliminated all raises and all bonuses through 2009 we took these measures while protecting the heart of our company the new vehicles that will secure our future Chrysler sales were down 20 5% through the first nine months of this year the worst decline of any major automaker the head of Chrysler Robert nardelli says that without Federal help the automaker will not have enough money to stay in business we just can't be confident that we'll be able to successfully emerge from bankruptcy that's why in Industry collectively we're requesting $25 billion of working capital to survive this liquidity crisis the new Rescue plan appears to be stalled on Capitol Hill during a separate hearing earlier in the day US Treasury secretary Henry pulson opposed the democrat's plan to use an additional $25 billion from the rescue package Deborah BL vaa News Washington

GM, Chrysler Scale Back Glitz at LA Auto Show

Associated Press

Transcript

two of America's big three car makers GM and Chrysler showed their Wares at the Los Angeles Auto Show but sent no Executives to make the sales pitch to the public but what will power us through this very simply is great product only Ford sent it's Tom brass and analysts say that's a strong signal that the focus for domestic car manufacturers is on begging for a bailout from the federal government to shore up their ailen businesses it means they're serious it means that right now they are really fighting for their lives they're spending all their time basically at Washington and at home trying to make sure that they're going to have a future right now it's more important for them to be in Detroit to be in Washington try and get some cash out of the government than it is to be here while us Brands scaled back their presence foreign makers stepped it up but even some of their Executives seem somber about demand for cars I don't think anybody has a clue about if this slump is going to go through 2009 half of it me 2010 two more years three more years nobody knows Ford was eager to show off its green and fuele efficient vehicles because there's a bigger demand for them here in California I present to you the new 2010 Ford Fusion every major automaker put eco-friendlier 4-wheelers on display from hybrids to alternative fuels to electrics mini a subsidiary of BMW unveiled the mini E plug it into the wall a full charge gets 150 mil and we are absolutely convinced about it that there is this Greener trand we described before not only here in California it's in other places in the United States as well but it is also the case in Europe and in Asia even with the Green Revolution some execs handed if American competitors fold and the events of recent months have proven that none of us is immune to the impacts from a Contracting economy stalled credit market and collapsing consumer confidence that means the American Market is folding to John moan the Associated Press Los Angeles

Big Three Fly Private Jets

CBS

Transcript

Ford Chief Alan Mali drove himself to Capitol Hill in a hybrid car that represents the greatest hope for Detroit's future it's great wonderful vehicle but inside he joined his counterparts from GM and Chrysler in a second day of begging for a $25 billion government loan the three us automakers need just to get to the Future the industry has a has a critical need right now Revenue has been devastated but Auto Executives seemed to undercut their own pitch when Congress learned they flew separately to Washington on three expensive corporate Jets it's almost like seeing a guy show up at the soup kitchen in high hat and tuxedo and they were ridiculed for asking taxpayers to cover years of production and management mistakes how do I know that you will not become the next AIG 25 billion now 25 billion next month 25 billion the month after that we asked the same question when we sat down late today with GM CEO Rick Wagner why should taxpayers believe that you won't be back again in 3 months or 4 months asking for more money we've really substantively restructured the cost side of the business and you know fed out a really a bunch of new models that are being well received can you promise taxpayers you won't be back to ask for more I can't promise anybody because I don't I don't know what's going to happen to the economy for General Motors the goal is to make it to 2010 that's when new labor contracts take effect and when a revolutionary new electric car capable of going 40 miles with no gas will hit the market but critics including former presidential candidate Mitt Romney who father was an auto executive says the current management must go you're going to want to see folks that come in uh that have a a team culture uh look you got to get rid of the corporate Jets you got to get rid of the executive dining room for the moment the Auto industry loan appears to be all but dead in Congress though it will surely be revived under an Obama administration meanwhile car makers say bankruptcy is really not an option because customers won't buy cars from companies that may not last long enough to cover those warranties Katie all right Bob or Bob thank you you