Special Car, auto, cars, vehicles

Dodd is not exaggerating. During today's hearing Wagoner admitted GM had investigated acquiring Chrysler a month or so back, but had abandoned the idea because it was running out of money: "...we were concerned we did not have the liquidity to survive until the deal closed." Senator Bob Corker from (R-TN) made this point: "GM is the reason we are here. There is no way we would be having these meetings if GM was not having problems." UAW chief Ron Gettelfinger told the assembled Senators: "Unless something changes, General Motors will be bankrupt by the end of the month."

No-one disagreed with him.

Here are some of the key themes to come out of today's hearing:

• The actual bailout bill could be $75 billion to $125 billion

Mark Zandi, chief economist, Moody's Economy.com, attending as an expert witness, claimed the $34 billion requested by the Detroit Three would not be enough to avoid bankruptcy in the next two years. Zandi contends the new car market will not recover as quickly as the Detroit Three anticipate. The credit crunch will continue to keep customers out of showrooms, and that the frenzied discounting of the past decade has led to a pull forward of demand that has yet to work through the system. He says a market of 17 million units -- close to the average of the past few years -- "is not supportable by underlying demand".

• Bankruptcy is not an option

Rick Wagoner confirmed fears over a possible bankruptcy had already begun to impact GM sales. "It is clear the overhang surrounding bankruptcy is affecting certain buyers." Ford Boss Alan Mulally claimed American consumers needed to believe in the company they were buying their cars from. Bankruptcy would mean "sales would fall off so fast we couldn't restructure". Mark Zandi pointed out the automakers would not get the financing they needed to work through a Chapter 11 bankruptcy in the current environment, so the government would likely have to provide that money. The taxpayers would therefore be on the hook "no matter what". "We recognize bankruptcy is not an option," said Senator Elizabeth Dole (R-NC).

• There should be a government-appointed "car czar" with wide powers

The need for strong oversight to ensure public funds were being applied correctly was a recurring theme among the senators questioning the Detroit Three CEOs, mainly, as committee chairman Dodd implied in his closing remarks, because it was felt the banks had gotten public money with too little clear direction as to how it was to be used. All three CEOs agreed with the idea of an oversight board or a trustee to monitor how loan money be used, even if that body or person had the power to impose sweeping restructuring conditions.

• GM and Chrysler should merge

"No thinking person thinks three companies can survive," said Senator Corker, who questioned Chrysler CEO Bob Nardelli at length as to why Ceberus would not make further investments in the company. "Chrysler doesn't want to be a stand alone business," he said, adding that it troubled him any loan to Chrysler would simply allow Cerberus to keep the company operating long enough to find a suitable buyer. He described a consolidation or merger of GM and Chrysler as "the kinds of things we need to force to make happen". "Everything I've seen suggests a merger between GM and Chrysler is a good idea," said Senator Bob Bennett (R-Utah), who claimed the two companies didn't need loans but an injection of government money he called "patient capital". Bennett then asked if GM and Chrysler would agree to a merger if it was made a condition of receiving government money. "I would be very willing to look at it," said Rick Wagoner. "The first job that would go would be mine," said Nardelli, "but if that's the criteria ...I would do it."

• Only $17 billion -- for now

Economist Mark Zandi recommended any money be paid in two tranches. As GM claims it needs $10 billion to get through into the first quarter of 2009, and Chrysler $7 billion (Ford's Alan Mulally stuck to the line the Blue Oval may not need to touch the $9bn credit line it's requesting) it was suggested this amount be paid, and a review set for March 31 next year to see whether restructuring plans were on track. The "car czar" or oversight body would then decide whether more money would be paid.

• The UAW needs to give up more

Senator Corker pressed UAW chief Gettelfinger hard on the issue of more concessions. GM's core problem, Corker said, was its debt level. He believed it would be necessary for GM's bond holders to accept 30 cents for every dollar of debt they held by March 31 (roughly a 50 percent premium over what it is currently trading for) to reduce the debt burden. But he said it was unreasonable to expect the bond holders "to take a haircut" without the UAW giving up more. Specifically, he wanted Gettelfinger to agree to cut UAW wage rates to the same level as that paid in transplant factories "and not a penny more", and wanted 50 percent of the $35.5 billion GM was due to pay into the union-owned VEBA fund by 2010 to be taken in the form of equity.

Tomorrow the CEOs sit down in front of the House Financial Services Committee for another grilling. While Chris Dodd took a swipe at the Bush Administration for not making some part of the TARP funding quickly available to help automakers, noting drafting legislation in the next 72 hours to ensure funding would be a mammoth task, he did say "...inaction is not an option". It's a long way from a slam-dunk, but the mood in Washington seems to be tilting towards a bailout. Whatever happens in the next few days is still open to plenty of speculation. But this much is clear: Detroit has changed forever.