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One of the chief architects of a plan to bail out the Detroit auto companies said today that General Motors Chairman G. Richard Wagoner should be forced to give up his post as a condition of receiving emergency loans from the federal government.

General Motors, an icon of American manufacturing and the world's largest automaker, yesterday threw itself at the mercy of Congress, saying it needed $4 billion to avert a cash crisis by the end of the month and as much as $18 billion in federal loans over the next year.

GM and its U.S. rivals Chrysler and Ford all pleaded for government loans, promising in return to use the opportunity to slash costs, jettison brands, restructure their finances and speed the introduction of fuel-efficient vehicles widely considered crucial to their future.

Together the three auto giants sought at least $28 billion and as much as $38 billion in government assistance, more than the $25 billion they requested just two weeks ago. Battered by the lowest car sales in a quarter century and tight credit conditions, the companies said they needed the money just to survive the next year.

"There is no plan B," said Fritz Henderson, GM's president and chief operating officer.

It was a humble moment for the three auto behemoths, which once were synonymous with American ingenuity and industrial might. Over the past three decades, they have lost ground to more agile foreign rivals that favored smaller cars built by non-unionized labor at lower wages.

This year the combination of high fuel prices and the paralysis in the credit markets has brought the U.S. companies to the brink. Chrysler yesterday sought $7 billion by the end of the month. Ford, which is in stronger financial condition, asked Congress to set aside as much as $13 billion to help the company if the economic downturn deepens.

The companies presented their plans yesterday, a deadline set by Congress, but there was no guarantee that wary lawmakers would agree to pump taxpayer money into firms that might not be financially viable.

House Speaker Nancy Pelosi (D-Calif.) said yesterday that Congress would not adopt a loan package for the automakers unless the ailing giants presented "a new business model, a new business plan" that was "worthy of the support that the taxpayers will invest in it."

But she also said that "bankruptcy is not an option" and predicted that either Congress or the Bush administration would intervene to prevent a collapse of the industry. Senate Majority Leader Harry Reid (D-Nev.) told reporters he expects to call the Senate back into session early next week with the aim of passing a bill by next Friday.

The chief executives of the three companies all seemed mindful of the drubbing they took two weeks ago when they sought taxpayer assistance. Excoriated for traveling by corporate jets to testify in Washington, all said they would make the 500-mile return trip by car this week for the new round of hearings. Ford and GM even said they would part with the aircraft permanently.

Ford chief executive Alan R. Mulally and GM chief executive G. Richard Wagoner Jr. also offered to cut their salaries to $1 a year if the government provides aid. Chrysler already pays chief executive Robert L. Nardelli that sum in salary. GM said it would also roll back other executives' pay.

The magnitude of the crisis, as portrayed by the companies, is daunting. Though the three companies described a dire situation two weeks ago, the situation seems even more grave now. GM said will need $12 billion by late March to keep operating. If the recession drags on, it might ultimately need up to $18 billion.

Rick Gershon/Getty Images

By David Kiley and David Welch 

combination of plunging consumer confidence and shortage of credit is pushing auto sales to their lowest monthly levels since the early 1980s—and the automakers themselves to the financial breaking point.

The U.S. Big Three automakers—General Motors (GM), Ford (F), and Chrysler—reported big double-digit declines in October sales: Ford was down 30%, GM off 45%, and Chrysler down 36%. Edmunds.com says it expects industry sales to be down 29% from a year ago. That would be the lowest level of sales since 1992, though other industry analysts expect a bigger drop to levels not seen since Ronald Reagan was in the White House.

"It was like somebody turned the lights off in October," said GM sales and marketing chief Mark LaNeve. According to GM, October, after adjusting according to sales per capita, was the worst month for sales in the post World War II era. It was worse even than sales in September and October after the September 11 terrorist attacks against New York and Washington in 2001. "In my 27 years in the business, I've never seen a month like this," said an exasperated LaNeve.

The declines aren't limited to U.S. brands. "The carnage was completely widespread," said GM's LaNeve. Toyota (TM), despite huge ad spending and zero-percent financing, reported a sales drop of 23%. Nissan (NSANY) was off 33%. Hyundai was down 31%. Suzuki was down 44%. Luxury makes weren't spared. Mercedes-Benz (DAI) was down 26% and BMW was off 10%.

Lobbying Washington

By days' end, when all automakers have reported October sales, the annual selling rate could be 10.7 million vehicles, estimates Deutsche Bank (DB) auto analyst Rod Lache. That's what sales would be if October's sales were projected over 12 months.

GM and Ford are both expected to release third-quarter earnings this week. The losses are expected to expose GM and Ford's burning of limited cash reserves to make up for falling revenue and profit. GM was burning about $1 billion per month at the end of the second quarter. But as sales have worsened since the summer, along with the broader meltdown of the equity and credit markets, the burn is expected to be worse for both companies.

Chrysler, which is privately held, does not report its financial results.

The Big Three automakers are aggressively lobbying Congress and the White House for loans to help them get through 2009 and the current recession. Without help, many analysts believe the automakers will run out of money by midyear. Few, however, believe the government won't act to help GM and Ford. GM is trying to acquire Chrysler (BusinessWeek, 10/31/08) LLC in the hopes of cutting enough costs to save the combined automaker.

Ford chief of sales analysis George Pipas says the biggest headwind for Ford is consumer confidence. "There is so much going on, it's just easier for the consumer to stay on the sideline for a while," says Pipas.

Both Cars and Trucks Hit

Some months, and even some quarters, sales favor either cars or trucks depending on gas prices and economic indicators like housing starts. But the pain is being felt throughout automakers' lineups. At Ford, sales of its fuel-efficient Focus were down 18%, and its trucks and SUVs were down 30%. Volvo sales at Ford were down 51%. At GM, trucks and SUVs were down 52% and passenger cars were down 34%.

The absence of credit, U.S. households' historically high credit-card balances, fears of rising unemployment, and depressed housing values, which have helped home-equity credit lines evaporate, are all keeping consumers on the sidelines. "One thing about a new car or truck is that very few people absolutely have to have a new one…most people can keep driving the one they have indefinitely," says marketing consultant Dennis Keene.

U.S. consumer confidence fell to the lowest level on record in October as stocks plunged and banks shut off credit. The Conference Board's confidence index tumbled to 38, less than forecast and the lowest reading since monthly records began in 1967, the New York-based research group said on Oct. 28.

Auto executives say yearend sales will begin this week, with more advertising hawking incentives on the airwaves after the Presidential election is over tomorrow. But what sales the automakers book will set them up for a big hangover in 2009. The first quarter of any year is traditionally the weakest. Industry sales in 2009's first half will be "sobering," says Jim Farley, Ford's worldwide marketing chief.