Auto Execs in the Hot Seat

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Wagoner leaned on the argument that it would be cheaper to help GM and the other companies with loans than allow a cascading failure of the companies. "The societal costs of a GM failure," said Wagoner, "would be catastrophic, with 3 million jobs lost within the first year…and a government tax loss of $156 billion in three years."

Credit Crunch Is a Culprit

The companies themselves are not the only target of derision on Capitol Hill. The UAW has been singled out by many critics of Detroit for being a bloated, spoiled, and overpaid workforce that has bullied the automakers into paying wages and benefits far out of line from what Japanese companies like Toyota (TM) pay their U.S. workers.

Gettelfinger focused his testimony on attacking criticism from Congress and several media commentators who have opposed the bailout in the past few weeks. "The current crisis can't be blamed on the Detroit-based companies producing gas-guzzling vehicles," said Gettelfinger. "Nor can it be blamed on overly rich union contracts." The union chief emphasized the negative effect of the credit crunch on the ability of consumers to get car loans, and the subprime mortgage and credit crisis that has skewered the broader economy.

Several Capitol Hill staffers this week said the measure that stands the best chance of passing during the lame-duck session of Congress is a revision of the 2007 energy bill that would immediately free up $25 billion in loans to retool plants. That money might otherwise take years to flow to the companies. But Gettelfinger surprised some by saying the union is against speeding up those funds. "This program was not designed to address the type of immediate cash-flow crisis that the Detroit-based auto companies are now facing as a result of the sudden drop in auto sales," Gettelfinger said.

Counting on Obama

That position, shared by Speaker of the House Nancy Pelosi (D-Calif.) and House Financial Services Committee Chairman Barney Frank (D-Mass.), may be dangerous. Advancing the green factory funds might provide enough liquidity to keep GM operating until the Obama Administration can act directly to help the auto industry in late January. Democrats and the auto companies are counting on Obama's willingness to tap some of the $400 billion that will be left in the Wall Street bailout fund in January.

"I reject that this is the only way we can help the auto industry, just because it's the way Republicans want to get it done," Frank told BusinessWeek. Frank also says he is not in favor of using the Wall Street funds for the auto industry. But his support may not be needed.

The union president also said he would not support tying immediate loan help to tougher fuel-efficiency standards. "It is not appropriate to hold emergency assistance hostage to broader fuel economy/environmental initiatives," Gettelfinger said.

Ford's "Bright Future"

Ford's Mulally acknowledged that some critics want to see a new business model in Detroit before putting billions of taxpayer dollars in play. "I completely agree…what many commentators and critics fail to recognize, however, is that we at Ford are on our way to realizing a complete transformation of our company—building a new Ford that has a very bright future," Mullaly said. On the same day, other Ford executives were in Los Angeles unveiling two gas-electric hybrid vehicles that get better mileage than rival Toyota products.

Ford has closed 17 plants in North America—including one third of its assembly plants—in the last five years. The company has reduced its workforce by 51,000 people in three years, and its hourly workforce has fallen from 83,000 to 44,000. Salaried headcount is down to around 12,000, from 33,000 in 2004.

"Speaking only for Ford, we are hopeful that we have enough liquidity based on current planning assumptions and planned cash improvement actions, but we also know we live in tumultuous times," said Mulally, who came to Ford two years ago after 37 years at Boeing (BA).

Fear of Helping Hedge Funds

But, Mulally said, "If any of the domestics should fail, we believe there is a strong chance that the entire industry would face severe disruption."

The presence of Chrysler in the hearing presented problems for some members of the committee. The automaker is owned by hedge fund Cerberus Capital Management, and some worry that taxpayer money will be used to enrich the billionaires who run it.

Chrysler CEO Nardelli attacked that concern. "Cerberus Capital Management has made it clear that it will forgo any benefit from the upside that would in part be created from any government assistance that Chrysler may obtain." Nardelli tried to convince the lawmakers that bankruptcy would be a dangerous unknown that could cost some 3 million jobs and the futures of all three companies. "We cannot be confident that we will be able to successfully emerge from bankruptcy," he said.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.