The heads of the three leading U.S. automakers will meet with House Speaker Nancy Pelosi Thursday afternoon to discuss a possible bailout — one day before General Motors and Ford Motor are expected to report sizable third-quarter losses and reveal painful new cost-cutting measures.
Executives with knowledge of the meeting said it will focus on preliminary discussions about what was at stake if one or more automakers were to fail. They said specific details of a bailout are not expected to be discussed. The meeting was also set to include Ron Gettelfinger, president of the United Auto Workers union.
“The industry needs time and it needs money and it has neither at this point. That’s the purpose of meeting with the Speaker,” said one executive.
Senate Majority Leader Harry Reid (D-Nev.) is not scheduled to be at the meeting. In a statement, Reid said he is open to considering additional measures to help the industry and would be discussing it in the days ahead with the automakers as well President-elect Obama’s transition team, Pelosi and other members of Congress.
One auto executive said it is not yet clear if the industry will seek help during an expected “lame duck” session of the outgoing Congress later this year or if it will wait for the new Congress and Obama to take office in January.
Sources also said the automakers are pushing back product development plans in an attempt to save cash. The move is a desperate one, as it hurts their plans to roll out the more fuel efficient models they need to reignite sales. But they say they have no choice in the current environment.
“Everyone’s having to do it,” said another executive at a U.S. automaker, who spoke on the condition his name not be used. “[Sales have] fallen off a cliff. These are far from normal slow times. We need to do what we’re doing in the short-term to address that.”
Both GM and Ford Motor are likely to discuss product development plans Friday when they report their financial results, according to sources.
Analysts surveyed by earnings tracker Thomson Reuters forecast that GM lost $3.51 a share in the quarter, or about $1.9 billion. Ford is expected to report a loss of 93 cents a share, or $2.2 billion.
These losses exclude special items. And with the companies looking at possible further cuts in production and payroll, there could be other charges that send losses even higher.
The situation is clearly dire for Detroit’s Big Three — GM, Ford and privately held Chrysler. Their Asian rivals have been struggling as well.
Toyota slashed its annual earnings forecast Thursday, saying profits will fall to less than a third of what they were the previous fiscal year. The Japanese auto giant will also post its first annual decline in U.S. sales since it became a major player here. The U.S. is now Toyota’s largest market.
Automakers reported the worst month of auto sales in 25 years in October and sales are expected to remain weak into next year due to tight credit for consumers and dealers, rising job losses nationwide and battered consumer confidence.
The crisis in the auto sector has prompted talk about a possible GM-Chrysler merger, one which would lead to the loss of tens of thousands of jobs and further factory closings. Those talks appear to be on hold at the moment, though.
There had been talk that GM and Chrysler would need federal loans if they were to try to complete a deal. But one of the auto executives said the possibility of a merger was not likely to be a topic at Thursday’s meeting.
Shares of GM (GM, Fortune 500) were down 10% in afternoon trading Thursday while Ford (F, Fortune 500) shares fell nearly 4%. Toyota’s (TM) stock plunged more than 17%.