* GM-Chrysler merger talks could restart
* Sen. Dodd hits Bush administration over inaction
* CEOs to appear before House committee Friday
* Fed to write Dodd about emergency loan power - source
* GM shares end down 16 pct, Ford closes 6.7 pct lower
By John Crawley and Kevin Drawbaugh
WASHINGTON, Dec 4 (Reuters) - The chief executives of
General Motors Corp and Chrysler LLC said they would consider
restarting merger talks if needed to win their slice of up to
$34 billion in emergency U.S. government aid.
"I would be very willing to look at it seriously," GM CEO
Rick Wagoner told the Senate Banking Committee on Thursday,
adding that merger talks earlier this year were dropped on
concerns GM did not have the financing to merge with Chrysler.
Chrysler CEO Robert Nardelli said his job would likely be
the first to go in a merger with GM, but if that would save
Chrysler and its workers "I would do it."
Leaving their corporate jets in Detroit and driving to
Washington, the chiefs of the Big Three automakers, including
Ford Motor Co CEO Alan Mulally, pledged to refocus on higher
fuel efficiency vehicles and lower production costs.
But they encountered deep skepticism among lawmakers who
are suspicious of such promises, given the companies' past
failures to ween themselves from gasoline guzzlers and to make
innovative cars that consumers want to buy.
"I don't trust the car companies' leadership," said New
York Democratic Sen. Charles Schumer at the hearing.
But in a comment reflecting many lawmakers' sentiments, he
added, "We can't let the industry fail." ID:nWEN1311
Most lawmakers want to help Detroit, but existing bailout
proposals are stuck in a political gridlock between
administrations, with President George W. Bush a lame duck, and
President-elect Barack Obama waiting to be sworn in Jan. 20.
No action on aid is expected before next week and perhaps
not even then, despite dire warnings at the hearing that GM
could collapse by the end of December without aid.
The CEOs will appear before the House of Representatives
Financial Services Committee on Friday.
DEATH SENTENCE
"Nothing concentrates the mind like a death sentence and
we're looking at a death sentence if we don't respond
intelligently and prudently," said Senate Banking Committee
Chairman Christopher Dodd at the end of a nearly six-hour
hearing. "We're not going to leave town without trying."
With the government showering a $700 billion bailout fund
on distressed banks and Wall Street, there is wide agreement
among lawmakers and the Bush administration that the automakers
need help too, but deep division about how to go about it.
Dodd criticized the Bush administration after the hearing
for failing to act, insisting that the bank bailout program,
known as the TARP, could be used to help Detroit.
Other lawmakers and the White House have called for
modifying a $25-billion Energy Department program meant to
assist automakers in developing technology to meet new
fuel-efficiency requirements.
The Federal Reserve could also make a loan to automakers in
some circumstances.
The Fed is expected to send a letter to Dodd on Friday
explaining how it must obtain sufficient collateral under law
to make any emergency loans, a source familiar with the letter
told Reuters on Thursday. ID:WEN1380
Shares of both GM and Ford closed lower in a day of broadly
bearish trading as Detroit's once mighty Big Three again came
hat in hand to Washington. The same CEOs failed to secure help
two weeks ago in an earlier round of congressional hearings.
This time the executives did not fly in on the jets that
drew sharp criticism on their last visit. ID:nN04413085
GM's Wagoner arrived at the Capitol building in a light
blue Chevrolet Volt electric prototype, but drove most of the
way from Detroit in a Chevrolet Malibu Hybrid. Mulally came in
a white Ford Escape Hybrid, and Chrysler's Nardelli arrived in
a white EV electric vehicle.
The CEOs warned Congress again that a steep slump in car
sales and sluggish world credit markets are threatening their
futures and millions of good-paying jobs.
The GM-Chrysler merger idea was pressed by Utah Republican
Sen. Robert Bennett and Tennessee Republican Sen. Bob Corker.
"I'd like to see that happen," Corker said. "I hope that's
an outcome... our country cannot really deal with three
separate automakers." ID:nN04415172
But United Auto Workers President Ron Gettelfinger
questioned claims of cost savings from a merger and told the
committee such a deal would bring "unbelievable" job losses.
BAILOUT COULD GROW
GM wants $4 billion and Chrysler $7 billion by year's end.
GM also wants another $8 billion in early 2009 and a $6 billion
line of credit if its cash position erodes further. Ford says
it has enough funds now but wants a $9 billion line of credit.
An economist told the committee that the estimated $34
billion overall cost of the bailout cost could rise. Two weeks
ago, the automakers had estimated they needed $25 billion.
The industry may need $75 billion to $125 billion to avoid
bankruptcy and the companies may well return asking for more
money later if they get the $34 billion they want now, said
Mark Zandi, chief economist of Moody's Economy.com.
"I'm skeptical, doubtful that it's going to end at $34
billion," Zandi said.
On a combined basis, sales by the three automakers plunged
40 percent in November. The economy, already a year into
recession, would suffer "severe and sweeping" damage if one or
more of the automakers failed, Dodd said. ID:nWEN1301
But Alabama Sen. Richard Shelby, the top Republican on the
committee, voiced doubts shared by some senators on whether
taxpayer funds are well-spent helping struggling businesses.
Shelby opposed the $700-billion bailout of Wall Street and
the banks and "applying the same standard, I intend to oppose
bailing out the Big Three auto manufacturers," he said.
WHITE HOUSE RESERVING JUDGMENT
The three companies submitted plans to Congress on Tuesday
intended to show that they can still be viable businesses.
Congress last month demanded the plans.
The White House said on Thursday it was too early to judge
the viability plans and that the administration wanted to hear
the testimony to Congress first. ID:nN04530567
In the hearing, the CEOs said they would accept some sort
of oversight board as a condition of a bailout.
They also vowed to reshape their business models. For
instance, GM -- the world's largest automaker -- plans to sell
its Saab unit and drop its Pontiac and Saturn labels.
All three automakers dismiss filing for bankruptcy
protection, but some lawmakers are exploring the possibility of
conditioning federal aid on an speedy court restructuring of
one or more of the Detroit manufacturers.
The head of the Government Accountability Office (GAO), the
investigative arm of Congress, said Congress could consider a
two-step approach with an immediate cash infusion to avert any
collapse, followed by a program for distributing more loans
over time based on certain criteria being met. ID:nWEN1307
Gene Dodaro, acting GAO comptroller general, also said the
Bush administration has legal authority to use money from its
bank rescue program to help Detroit.
Shares of GM closed regular trading Thursday down 16.1
percent at $4.11, while Ford ended 6.7 percent lower at $2.66,
both on the New York Stock Exchange.
(Reporting by John Crawley, Karey Wutkowski and Rachelle
Younglai in Washington, with Kevin Krolicki and David Bailey in
Detroit. Writing by Kevin Drawbaugh; Editing by Tim Dobbyn)
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