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Robert Nardelli, Rick Wagoner and Alan Mulally trio plead for aid!

By Amarendra Bhushan for CEOWORLD Magazine Updated:November 19, 2008

Chrysler LLC CEO Robert Nardelli said the automaker could be forced into bankruptcy without immediate help, and “we cannot be confident that we will able to successfully emerge.” General Motors Corp. CEO Rick Wagoner said the failure of the industry would be “catastrophic,” costing 3 million jobs in the first year. Ford Motor Co. CEO Alan Mulally said if one of the automakers failed, the whole industry could be disrupted.

Nardelli said Chrysler ran through $5 billion this year, including $3.3 billion in the third quarter, and had just $6.1 billion on hand. GM said it expected to burn through $15 billion this year and could burn through another $10 billion next year. Robert Nardelli confirmed for the first time how much cash the privately held company had burned through — “roughly $1 billion a month during the three months ending September 30.” Chrysler burned through about $3 billion in cash in the third quarter, meaning Detroit’s Big Three automakers burned through $17.6 billion in that time period. General Motors Corp. burned through $6.9 billion; and Ford $7.7 billion.

GM chairman and CEO Rick Wagoner said the company would burn through roughly $15 billion by year’s end, on top of the $12.9 billion it had burned through in the first nine months of the year.

Peter Morici, a business professor at the University of Maryland, told the Senate committee that Detroit’s automakers have been victimized by protectionist policies in foreign countries.

“Today, the Detroit three have achieved remarkable progress,” said Morici, who opposes aid for Detroit. “But they still don’t have costs as low as” their foreign rivals.

He said bailing out Detroit’s automakers would be putting off inevitable bankruptcy filings, which he said are necessary to getting Detroit automaker’s costs in line with foreign rivals.

Morici also encouraged the Senate to closely examine the trade policies that Detroit’s automakers are facing as well as currency manipulations in foreign countries.

UAW President Ron Gettelfinger, Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli and GM CEO Rick Wagoner have given their prepared remarks to the Senate committee. The group said they have already undergone massive restructuring efforts and continue to do so.

“What exposes us to failure now is the global economic crisis,” Wagoner said.

If Detroit would fail, he added, “would be catastrophic.”

I’m Rick Wagoner, Chairman and Chief Executive Officer of General Motors. Thank you for the opportunity to speak today about the future of America’s domestic auto industry.

I’d like to acknowledge for the Committee the audiences that I represent:

•General Motors directly employs approximately 96,000 people in the United States.

•We have 6,500 dealers across the country, who employ another 340,000.

•Last year, we purchased more than $30 billion of goods and services from more than 2,000 suppliers in 46 states.

•Our pension program covers nearly 475,000 retirees and spouses, and our health benefits extend to about one million Americans.

•We have more than [insert latest number] registered stockholders.

•And 70 million of our vehicles are registered to U.S. citizens… 22 million of them purchased in the last 5 years.

But this is not a good option for Chrysler, and more importantly, for the auto industry or the broader economy – for the following reasons:

1. We believe that retail sales would be impacted materially as a result of declining consumer confidence, and we will be forced to heavily discount existing inventory to move our product.

2. Given our common supplier base – at Chrysler, 96 of our top 100 suppliers are common to Ford and GM – the bankruptcy of any one domestic automaker would place enormous pressure on the supply chain and, consequently, that company’s competitors.

3. Our factories would likely be idled for a significant period of time while we renegotiate contracts with each of our thousands of individual suppliers.

4. Restructuring and reorganization costs and expenses will be materially higher in connection with a Chapter 11 process: supplier and dealer support and marketing costs will increase, general economic dislocation will follow and significant fees and expenses will be paid to an army of bankruptcy professionals.

5. The overall amount and cost of financing the restructuring will be significantly higher in a Chapter 11 process than the working capital bridge we are requesting here today.

6. And finally, we cannot be confident that we will able to successfully emerge from bankruptcy.

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