DETROIT (AdAge.com) -- The CEOs of Detroit's three carmakers spent a grueling six hours today testifying before the U.S. Senate Banking Committee on their requests for federal loans during which there were some surprising revelations.
Robert Nardelli, chairman-CEO of privately held Chrysler, admitted that 240 of the automaker's dealers shut their doors (or "have thrown their keys in," as the executive put it) this year and that another 250 dealers are on credit hold. He said Chrysler, which is majority-owned by Cerberus Capital Management, built in negative vehicle pricing and no market share gains for the next few years into the recovery plan it filed Dec. 2 to the committee.
Sen. Robert Bennett (R-Utah) asked Rick Wagoner, chairman-CEO of the nation's largest automaker, General Motors Corp., and Mr. Nardelli whether the two would merge their companies if it was a condition of getting the loans. Mr. Nardelli said such a deal would result in annual savings of between $8 billion and $10 billion to the merged business. Mr. Nardelli said his job would be the first to go in such a merger and he'd gladly leave if that deal would save Chrysler.
Mr. Wagoner said GM would "be willing to look at this on its merits," but said the reason GM and its board called off recent merger talks was to focus on GM's liquidity after the market dropped dramatically.
A recurring theme was that the government would make an initial loan to the companies, which would have to return to Washington March 31 and prove to an oversight panel that their survival plans were on track before they could get another. The Detroit carmakers are seeking a combined total of up to $34 billion in federal loans.
But Mark Zandi, co-founder and chief economist of Moody's Economy.com, testified that Detroit would need considerably more -- a total of between $75 billion and $125 billion -- to stay out of bankruptcy court in the next couple of years. Still, he told the committee that the best option for Detroit is to restructure outside of bankruptcy.
At least two senators took Chrysler, the smallest of Detroit's Big Three, and its parent to task, saying they were concerned the automaker's parent wanted federal dollars to help keep it alive while it found a buyer. "What troubles me is we would be providing you money to stay around long enough to get married," said Sen. Bob Corker (R-Tenn). Citing a discussion he had last night with an unnamed Cerberus board member, he added that Cerberus really wanted the carmaker's finance company, not the its auto-making operations, when it acquired its 80% stake in Chrysler from Daimler in 2007.
Mr. Nardelli said Cerberus is committed to keeping Chrysler viable and injected an extra $2 billion in cash into Chrysler this year.
The executives will testify tomorrow morning before the U.S. House Committee on Financial Services. But the clock is ticking, as GM and Chrysler have said they could each run out of cash before year's end.
"My sense is many of us here feel inaction is unacceptable," said Committee Chairman Sen. Chris Dowd (D-Conn.) as he wrapped up the session. "We are looking at a death sentence if we don't act prudently." Mr. Dowd said he would stay in Washington to try to get legislation passed quickly.