Ahead of Hearings, Some Lawmakers Back Bankruptcy for Big Three

The Big Three automakers are preparing to make their final pleas for billions in government assistance this week, suggesting a dire future if nothing is done, but some conservatives argue that bankruptcy might be the best option for the companies and the country.

The automakers sent representatives to Capitol Hill on Wednesday to grease the wheels ahead of a two-day beg-a-thon in which the companies will ask lawmakers for up to $34 billion in emergency aid. The heads of Chrysler, General Motors and Ford are also offering a litany of concessions to make their proposals more attractive.

But so far receptive Democratic leaders have made no commitments and reluctant Republicans are voicing opposition to a bailout.

"I don't see the upside to the obligating of more taxpayer money for a private industry," Georgia Rep. Tom Price, incoming chairman of the conservative Republican Study Committee, told FOXNews.com.

Price said Chapter 11 bankruptcy would allow the companies to reorganize, eliminate some of their debt and become more competitive, and "the longer they delay in moving in that direction, the more pain will be seen by the employees as well as the market."

Texas Rep. Jeb Hensarling, sitting chairman of the Republican Study Committee, said there's still a lot of skepticism among House conservatives, even though nobody wants to see the Big Three fail. He said bankruptcy should be on the table.

"It's painful, it's not a fun process. But some actually end up leaner, meaner, more profitable, more healthy in the back end of the process," Hensarling told FOXNews.com. "I don't buy into the fact that (bankruptcy is) simply not an option."

South Carolina Gov. Mark Sanford has taken the same position. The Republican governor lamented what he called a "bailout mentality" in an interview with FOX News.

"If we go far enough down this road, we move to a political economy rather than a market-based economy," he said. "And I don't think that is a road we want to go down."

The Big Three automakers are working hard to convince lawmakers and their constituents that government aid is the only viable option for the survival of their industry, and the health of the American economy.

Determined to burnish their badly tattered images, Ford CEO Alan Mulally, GM CEO Rick Wagoner and Chrysler chief Bob Nardelli drove the 520 miles from Detroit to Washington in fuel-efficient hybrid cars for this week's hearings.

Fritz Henderson, president and chief operating officer of General Motors, took to the TV airwaves to stress that bankruptcy is not a viable route. He said that path would further erode consumer confidence in the automaker.

Chrysler Vice Chairman Jim Press warned Wednesday that a carmaker collapse could have disastrous consequences.

"Our back is against the wall. If we don't get through this at this point in time, as early as the first quarter of next year we could have difficulty paying our bills, which would have a catastrophic impact on our economy. It could make us fall into a depression, God forbid," he said.

Dan McGinn, an auto industry analyst and adviser to GM, gave a similar prediction.

"It's a crisis. ... This is going to be one of the most important votes these members of Congress ever cast. We're talking about millions of jobs," he told FOX News. "Everybody is frightened by the prospect. If we lose any of these jobs, it could be the fastest road from recession to depression."

House Speaker Nancy Pelosi predicts a government "intervention" will happen. She, too, said bankruptcy is "not an option" and that she favors a short-term loan.

Senate Majority Leader Harry Reid, though, says his Democrats' plan to tap the Wall Street rescue fund to save U.S. automakers from collapse is essentially dead. Reid said support in Congress is too limited to pass legislation to use some of the $700 billion financial sector bailout to help the teetering carmakers.

The Bush administration and auto state Republicans and Democrats are pushing instead to convert a $25 billion program to help the carmakers produce green vehicles into emergency loans to keep the Big Three afloat.

Democratic Rep. Paul Kanjorski of Pennsylvania, who was the only lawmaker to show up for the briefing with Chrysler representatives Wednesday, said he favors a short-term "bridge loan" to get the companies through the first quarter of 2009.

Sources familiar with the briefing told FOX News that many questions centered on why the automakers are looking for money when the parts manufacturers would be hit almost as hard. One source indicated that perhaps the parts makers should be making their pleas as well, since their production is integrated so closely with the industry.

"This is so serious to the country's long-term ambitions as a major super power," Kanjorski said. But he added, "We're not obliged to write a blank check."

He also pointed out that the CEOs of successful Japanese firms make a fraction of what American automaker CEOs earn.

As part of their proposals, the Big Three CEOs have said they will work for $1 a year. Ford offered to cancel management bonuses and salaried employees' merit raises next year, and GM said it would slash top executives' pay. Ford and GM both said they would sell their corporate aircraft.

Henderson said after the GM briefing Wednesday that "skepticism is healthy" among lawmakers.

The United Auto Workers union, scrambling to preserve jobs and benefits that could disappear with an automaker collapse, agreed at an emergency meeting in Detroit to delay the companies' payments to a multibillion-dollar, union-run health care trust and scale back a jobs bank in which laid-off workers are paid most of their salaries.

Ron Gettelfinger, the UAW chief, said the union would go back to the negotiating table to consider further concessions to the Big Three.

Peter Morici, a University of Maryland business professor who testified at the auto industry hearings in November, called the UAW concessions "window dressing."

He said a Chapter 11 bankruptcy filing would likely hurt union benefits as well as the CEOs' reputations, but that if handled delicately would allow the companies to reorganize their debt and emerge with lower labor costs. With tens of thousands of layoffs already being proposed by the companies, Morici said it makes very little differences to the workers whether their employers receive government aid or file for bankruptcy.

"This is not a bailout. This is going to be a slow-motion nationalization," Morici said. "If you give them money today, you'll give money tomorrow and forever after that."

But he said the consequences would be disastrous if the Big Three automakers collapsed entirely.

One out of 10 U.S. jobs is auto-related. It is the largest manufacturing sector, and makes up 4 percent of the country's GDP.

In blueprints delivered to Capitol Hill on Tuesday, GM and Chrysler said they needed an immediate infusion of government cash to last until New Year's, and both said they could drag the entire industry down if they fail. Ford is requesting a $9 billion "standby line of credit" that it says it doesn't expect to use unless one of the other Big Three goes belly up.

But Chrysler said it needed $7 billion by year's end just to keep running. And GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit it might need if economic conditions worsen. The two painted the direst portraits to date -- including the prospects of shuttered factories and massive job losses -- of what could happen if Congress doesn't quickly step in.

President-elect Barack Obama said it appeared that the Big Three chiefs are coming back to Congress with a "more serious set of plans" for how their companies are going to survive. But he reserved comment until he sees what the automakers propose during hearings Thursday and Friday.

The Senate Banking Committee is to hear testimony Thursday from the auto executives, Gettelfinger, and the head of the Government Accountability Office on the companies' plans.

The House Financial Services Committee is to hold a similar session on Friday.

FOX News' Judson Berger, Carl Cameron and Chad Pergram and The Associated Press contributed to this report.