5 Dec 2008

Cash-strapped car bosses admit making mistakes

4:30 pm on 5 December 2008

General Motors boss Rick Wagoner and his Ford counterpart Alan Mulally have admitted making mistakes in the way that they have run their businesses.

They were in Washington with Chrysler boss Bob Nardelli on Thursday, and were explaining to a Senate committee why they wanted $US34 billion in aid.

All three also blamed the US recession for decimating sales and leaving their companies in desperate need of cash.

But senators raised doubts about whether the money would be enough.

"No matter how important the autos are to our economy, we don't want to put good money after bad," said President George W Bush in a separate interview with US media, the BBC reports.

"We are here today because we made mistakes, and because circumstances beyond our control pushed us to the brink," said Mr Wagoner, referring to the global economic downturn.

Mr Nardelli said that Chrysler had lost $US16 billion of revenue as a result of plunging car sales this year alone.

Mr Mulally admitted that Ford had "produced more vehicles than our customers wanted, then slashed prices".

In his opening comments, chairman of the Senate Banking Committee, Democrat Christopher Dodd, laid bare the severity of the situation.

Letting Chrysler, General Motors or Ford fail would be like playing "Russian roulette with the entire economy" and failure would affect "almost every sector of the economy", he said.

Mark Zandi, economist with Moody's, also testifying to the committee as an independent expert, said bankruptcy at this time would be "cataclysmic" for the US economy.

He told the committee that $US34 billion would not be enough to save the carmakers and believed they might need as much as $US75 billion to $US125 billion.

This sparked concerns that the so-called Detroit Three would simply return to Washington, cap in hand, when the money ran out.

'Realistic' requests

All three bosses said their requests were realistic and based on conservative sales estimates. They said that their plan would also focus heavily on boosting investments in more fuel-efficient, environmentally friendly cars.

US policymakers have already approved $US25 billion in cash handouts to the car companies to help them develop greener vehicles.

All three of the bosses were at pains to explain how they had driven to the hearing in hybrid cars made by their respective companies. They had been heavily criticised two weeks ago for flying to Washington in separate private jets for their last hearing in Congress.

Earlier this week, Chrysler, Ford and General Motors submitted their proposals to the US Congress for the multi-billion-dollar loans upon which their survival could depend.

Slashing costs, reducing levels of debt and investing in greener technologies form the centrepiece of each proposal.

The chief executives of Ford and General Motors even offered to work for $1 a year if Congress approves the emergency aid.