Auto Execs More Prepared to Plead Case on Capitol Hill Second Time

December 4, 2008 4:08 PM EST

In the first day back on Capitol Hill, the 'Big 3' automakers addressed members of the House Finance Committee. And, today was very different. All three CEO's drove company cars (hybrids) and were well prepared with facts outlining when and why they needed funds and exactly how much was needed.

The Automaker's last visit was one notch above a public relations disaster, with the CEO's being criticized for bad decisions, lack of preparation, and lack of support for their individual brands - specifically - flying to Washington on their own corporate jets.

General Motors (NYSE: GM) CEO, Rick Wagoner, was up first and asked for the largest amount ($18 billion). Wagoner said the company needed $4 billion immediately, and $4 billion in January and then a line of credit to access as needed. In his intro speech, Wagoner pointed out GM has learned from its past contributions and mistakes and has developed a strong plan going forward. Wagoner says he wants the goals of the company to stay in-line with the country.

Some key points in the plan include: Cost alignment, Renewed interest in new technologies, Reduction in brands, Cost reductions, Working with the UAW for labor competitiveness, and Suspension in dividend and extra corporate compensation.

Ford (NYSE: F) CEO, Alan Mulally, said the company had already begun its transformation, recently selling the Aston Martin and Range Rover brands, reducing its stake in Mazda and now considering the sale of Volvo. Mulally said the company will be concentrating focus on Ford's main brand, 'The Blue Oval'.

Mulally says the company used to focus more closely on trucks, but now focuses on a balanced portfolio. He also appreciates the UAW working with Ford to help the company become more competitive. Ford is now 'Laser Focused' on quality, fuel efficiency, safety and customer satisfaction.

Mulally says Ford doesn't anticipate a near-term liquidity issue and sees profitability in 2011. BUT, Ford is requesting access to a $9 billion line of credit/bridge loan.

Chrysler's CEO, Nardelli, said his company needs $7 billion, whether loan or line of credit. He feels that Chrysler has already taken steps to streamline the company. Nardelli says measures were taken back when Chrysler separated from Daimler (Benz) (NYSE: DAI) because sales immediately dropped by nearly 20%. Since then, Chrysler has cut jobs, idled plants, cut expenses, and streamlined focus. Now, Nardelli thinks the money would help carry the company through the difficult economic period and help provide financing to potential customers, dealerships and suppliers.

A few other items of interest:
The COO of Johnson Controls (NYSE: JCI), which is the third largest supplier in North America, behind Magna Int'l (NYSE: MGA) and Delphi (which filed bankruptcy a few years ago), said that his company would survive even if one of the 'Big 3' filed for Chapter 11, but hundreds of thousands of jobs would be lost and several women/minority owned businesses would go under soon after.

Secondly, an analyst from Moody's attended the hearing and was asked to give his opinion. The analyst said he felt the 'Big 3' would need $75 to $125 billion to continue operations. His analysis included continued economic pressure, continued problems in obtaining credit (for the companies, dealers and consumers), future car sales slowing due to foreign competition, divestiture of current brands and models and the negative consumer sentiment forming from the current news and government hearings. He also pointed out that current models are lasting longer and may not need to be replaced as often. However, the analyst did state that bankruptcy would have a drastic affect on the U.S. economy, causing unemployment to skyrocket, several suppliers to quickly follow in Chapter 7 or 11, and thinks the government would still ultimately have to help/bailout by guaranteeing warranties, working with bondholders etc.

Also, Tennessee Senator, Bob Corker, mentioned that all of the applications (to the Energy Dept) from the 'Big 3' had been denied. The applications were for part of the $25 billion set aside by the Energy Dept to automotive upgrade plants, help make cars more fuel efficient, and streamline operations in fuel technology) Also note that the three automotive companies can re-apply for funds in the energy bill.

Lastly, several negative opinions have been formed regarding the UAW. However, one fact that was pointed out several times today, was that wages/compensation only accounts for 10% of the spending by these companies. Also, the UAW President said he has and will continue to make consessions to prevent any bankruptcy.

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