November 18, 2008 - 3:00 pm ET UPDATED: 11/18/08 3:50 p.m. EST
WASHINGTON -- Ford Motor Co. CEO Alan Mulally warned today that a government failure to aid the auto industry would create "tremendous risks to our already fragile economy."
Avoiding those risks is in the "public interest" that Congress would serve by providing emergency loans to automakers, Mulally said.
Mulally called on Congress "not to think of individual companies but rather of the industry -- and the economy -- as a whole."
The remarks came in prepared testimony Mulally was scheduled to deliver today to the Senate Banking Committee. The committee is holding a hearing on legislation that would provide $25 billion in loans to automakers and suppliers.
Similar bills before the Senate and House would provide the loans, but their fate is uncertain. Votes are expected this week.
Also scheduled to testify today's hearing are General Motors CEO Rick Wagoner, Chrysler LLC CEO Bob Nardelli, UAW President Ron Gettelfinger and Sen. Debbie Stabenow, D-Mich.
No guarantees
In his prepared statement, Mulally said he has heard a lot of criticism of the Detroit 3 in recent weeks -- mainly that the companies have a business model that no longer works, and that they must be restructured.
He contended that Ford is pursuing a "complete transformation of our company" -- closing plants, shedding employees, introducing more fuel-efficient models, negotiating a cost-saving labor agreement and selling assets to raise cash.
Wagoner's prepared testimony outlined similar restructuring steps. He said: "What exposes us to failure now is not our product lineup or our business plan or our long-term strategy. What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."
Wagoner said GM has cut its North American costs by $9 billion, or 23 percent, since 2005. He said GM's new UAW contract will bring another $3 billion to $4 billion in savings by 2011.
Next year, Wagoner noted, GM will offer 20 models in the United States that get 30 mpg on the highway. "We've moved aggressively in recent years to position GM for long-term success," he said.
Mulally's said Ford executives "are hopeful that we have enough liquidity based on current planning assumptions and planned cash improvement actions, but we also know that we live in tumultuous economic times in which rapid and unexpected change seems to be the norm rather than the exception."
He suggested that Ford might weather the current downturn without emergency aid, but said there is no guarantee.
Mulally said the failure of any of the Detroit 3 could bring down the entire industry, including suppliers and dealers, and affect as many as 3 million jobs. "There are very few isolated events in our industry," he said.
He noted that even import-brand automakers have suffered amid dramatically declining sales -- a drop equal to about 5 million vehicles annually.
GM has warned that without financial help by year end, it soon would lack the minimum amount of cash it needs to sustain operations.
In today's remarks, Wagoner pledged that if government helps automakers through the crisis, "We will repay the taxpayer's faith and support many times over, for many years to come."
Cerberus will 'forgo any benefit from the upside'
Also today, Chrysler LLC Chairman Bob Nardelli said in his testimony that Cerberus Capital Management LP, Chrysler's majority owner, would "forgo any benefit from the upside that would, in part, be created from any government assistance Chrysler LLC may obtain."
Nardelli also said Chrysler, the only privately held volume carmaker, is "willing to provide full financial transparency and welcome the government as a stakeholder."
Without immediate assistance, "Chrysler's liquidity could fall below the level necessary to sustain operations," he said. Such a scenario would mean Chrysler might not be able to meet its $20 billion annual health care obligation, its $2 billion annual pension contribution to retirees, $7 billion in current payables, $35 billion in future supplier business and the $6 billion in wages it pays 56,600 direct employees, Nardelli's testimony stated.