U.S. Auto Makers Look to Federal Sales Incentives

As executives from the Big Three auto makers prepare to make a second pitch for a federal bailout, concern is rising in Detroit that it will be difficult to show lawmakers how they can return to profitability with sales at their current depressed level.

Their solution: Get Washington to help them sell more cars.

General Motors Corp., Ford Motor Co. and Chrysler LLC may go back to Washington and urge Congress to take measures to spur consumer demand, in addition to providing the $25 billion in loans the auto companies seek.

"There is no way any car company can make money at the current demand level," said a key executive at a Big Three auto maker. "The government has to get credit flowing so that the market goes back to at least 14 million to 15 million [vehicles].... We can figure out how to survive at that level."

On Monday, Sen. Charles Schumer (D., N.Y.) plans to send a letter urging the Federal Reserve to make financing available for the auto companies' lending arms, which would allow them to offer more auto loans, a spokesman for the senator said. The letter will also ask the Treasury to speed approval of GMAC LLC's request to become a bank holding company.

Vehicle sales are tracking at such a low level right now that most or all auto makers are losing money in North America. Globally, Toyota Motor Corp., Chinese car makers and even Europe's normally recession-proof luxury auto makers are struggling to stanch losses, the executive of the Big Three firm said.

In October, auto sales were running at an annualized rate of about 11 million vehicles a year, well below the level of 16 million the industry considers healthy.

Congress last week rebuffed the pleas from GM, Ford and Chrysler for a bailout, telling them to return by Dec. 2 with credible blueprints showing how they would use taxpayer dollars to become "viable." Top-level auto executives worry they will have a tough time doing that.

As part of its push to Washington next week, GM is working to renegotiate some of its financial obligations, including terms of debt and money it owes to the United Auto Workers union, according to a person familiar with the plan. GM's board, which is open to considering all options for GM's survival, will be meeting several times this week to review the company's pitch to Washington, this person said.

Ford and Chrysler executives also said Sunday that their companies are developing plans.

While the chief executives of GM, Ford and Chrysler were testifying before the Senate and House last week, auto dealers and a few members of Congress called for tax incentives or other measures designed to boost car buying.

In an interview over the weekend, Michigan Gov. Jennifer Granholm, who is serving as an economic adviser to President-elect Barack Obama, said she is working with the auto makers to craft a "definitive plan" to present to Congress on Dec. 2.

Congressional Democrats have urged the Bush administration to provide loans for the auto makers from the $700 billion Troubled Asset Relief Program, but the White House and Treasury Secretary Henry Paulson have opposed that.

Gov. Granholm said one way of getting help from TARP would be to have banks that get some of the $700 billion "steer" financing to the Big Three or provide the Big Three with short-term loans to keep them from running short of cash. (With a rescue far from assured, the auto industry is scrambling to conserve cash. Please see related articles on page B3.)

It is unclear how far along these discussions are, or if there is an appetite at the White House to issue such a directive.

Members of Congress from Michigan have been in contact with Mr. Paulson and Commerce Secretary Carlos M. Gutierrez to push for funding for Detroit, if Congress isn't able to come through with a bailout bill, people familiar with the discussions said Sunday.