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Ailing Auto Industry Sends in Its Pitchman
CEO of GM Leads Lobby Of Lawmakers for Loans
By Frank Ahrens
Washington Post Staff Writer
Friday, September 12, 2008; D01
General Motors chief executive has been selling cars for a long time, but his pitch today in Washington will be one of his most urgent. He will try to convince lawmakers that the country's homegrown automakers deserve help from the government as they prepare to build more hybrids and other fuel-efficient cars for a radically different market.
Among other priorities, Wagoner and fellow Detroit executives are seeking as much as $50 billion in loans over the next two years to help retool factories. But automakers say that they are not seeking a bailout and that circumstances today are far different from nearly 30 years ago when Lee Iacocca, then 's chief executive, got $1.5 billion in loans from Washington to stave off bankruptcy.
Wagoner is scheduled to address a Senate energy summit today. In addition to the loans, he is expected to ask lawmakers to approve new drilling, streamline emissions regulations and subsidize alternative-fuel development, according to those familiar with Wagoner's remarks.
He and other Detroit executives wrap up a week of lobbying Washington at a time when the landscape of the U.S. auto industry is far different from three decades ago and even a few years ago.
Today, the Big Three is no longer an America-only club.
By U.S. sales through the first eight months of this year, today's Big Three are GM, and Ford, in that order. Chrysler? No. 5 by sales.
More bracingly, by company value, none of yesterday's Big Three would be anywhere near today's Big Three.
Toyota's market capitalization, or the value of its outstanding shares, stands at $158.6 billion. 's is $61.9 billion. By comparison, Ford is the highest-valued U.S. automaker, at $10.6 billion. GM is worth $7.2 billion. Shares of GM and Ford rose in yesterday's trading, while shares of Toyota and Honda were flat.
In his remarks to the Senate Energy committee today, Wagoner is expected to outline a 10-point plan to help U.S. automakers. He plans to tell lawmakers that GM is committed to raising the fuel economy of its cars and light trucks by 40 percent, as required by last year's energy bill.
At the same time, Wagoner is expected to ask lawmakers and regulators to spread the pain, pointing out that automobiles are only one source of emissions and that other polluters need to be targeted, as well.
The final point of Wagoner's pitch is the biggest: A request for $25 billion in loans right away and as much as $25 billion more over the next two years.
Automakers would use the loans to speed the conversion of plants that make pickup trucks and sport-utility vehicles into ones that make high-fuel-efficiency vehicles, such as small hybrid cars.
Last year's energy bill authorized the Advanced Technology Vehicles Manufacturing Incentive Program, which allows for $25 billion in direct, below-market-rate loans to automakers and suppliers. Wagoner will ask Congress for full funding of the program immediately and more money later.
Key for the auto industry: The government loans would come at single-digit interest rates. Because the U.S. automakers' bond ratings have dipped so low, market lenders are charging interest rates near 20 percent.
Sen. (D-N.M.), chairman of the Energy Committee, does not call these loans a bailout.
"There is a strong case to be made for helping [automakers] with loan guarantees, to facilitate the retooling that these companies are going to have to engage in," Bingaman said in an interview yesterday. He added that lawmakers would be sympathetic to the auto industry's request for an additional $25 billion in loans.
"The people I've talked to, particularly on the Democratic side in the Senate, recognize that it's important to keep the auto industry competitive and if this does that, people are willing to support it," Bingaman said.
House Speaker said yesterday at her weekly news conference that she intended to cover the cost of at least $25 billion in loans to the auto industry in one of several bills now moving through Congress.
"We certainly will have it in something," Pelosi said. "It is very essential to the industry, and it goes in the right direction of new technologies. And so there is great support for it. What vehicle it is in just is a question of what will pass and what will be signed by the president."
Such support is not unprecedented. After Sept. 11, 2001, the government helped the slumping airline industry with loans and grants.
GM spokesman Greg Martin said Wagoner hoped to "communicate a sense of urgency" to lawmakers today: The Senate is scheduled to adjourn Sept. 26.
Toyota, whose U.S. yearly sales dropped 8 percent through August, said it has not taken a position on the loan package.
"However, if assistance provisions are eventually established, we believe they should be equitable among all manufacturers, without disadvantaging any company or groups of companies," Toyota spokeswoman Martha Voss wrote in an e-mail yesterday.
, chairman of the Center for Automotive Research, said these loans were different from the ones Chrysler got three decades ago. This time, he said, the entire industry was gut-punched by the sudden spike of gas prices to $4 a gallon.
"What we're in now is an industry-wide kind of thing, and that is that companies are facing really tough cash flow in the face of the need to make major investments driven by future regulations," Cole said yesterday. "That was not part of the Chrysler situation."
Cole said Detroit automakers were "swimming across a river that is getting wider and deeper and faster, while the pot of gold on the other side is getting bigger and brighter."
The global auto market is little better off. August sales fell in Germany, England, Spain and even in booming China.
Wagoner is a seasoned pitchman and has survived GM's slump longer than many thought he would.
But industry experts say he and other Detroit automakers must prove they deserve Washington's help. They are making their pitch at a time when critics say the U.S. auto industry has brought a slump on itself, by continuing to crank out gas-guzzling trucks and SUVs and passenger cars of dubious quality rather than by following the Japanese model of producing high-quality cars.
Regardless of changes in consumer preference, though, this year's sales figures show that the weak economy has hit almost all automakers.
For the first eight months of 2008, sales of GM vehicles were down 18 percent, while Ford sales were down 16 percent, according to Autodata. Chrysler was down 24 percent.
In addition to Toyota's 2008 sales dive -- after years of experiencing nothing but growth -- was down 2 percent, and was off 4 percent.
Among the world's six largest automakers, only Honda (up 2 percent) and (1 percent) crept into positive sales territory through August.
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