DETROIT — Chrysler LLC Chief Executive Robert Nardelli told lawmakers considering financial support for the auto industry Friday that Chrysler would be pushed toward bankruptcy or even liquidation if it doesn't get federal loans.
Nardelli told the House Financial Services Committee that a million people who depend on the automaker for their livelihoods would be unemployed if the company failed.
Chrysler on Friday said it hired the prominent bankruptcy law firm of Jones Day to help study whether bankruptcy would be a better option than government loans. The firm was hired after lawmakers asked for a study during congressional hearings in November, spokeswoman Lori McTavish said in a statement.
"The results of this evaluation determined the impact to the overall domestic automotive industry would be devastating," the statement said.
Chrysler is seeking $7 billion in federal loans. Nardelli has said the Auburn Hills, Mich.-based company is running so low on cash that it's nearing the minimum amount required to pay all of its bills.
Nardelli's statement came during the committee hearing as Rep. Thad McCotter, R-Mich., asked the CEOs of Chrysler, Ford Motor Co. and General Motors Corp. if their companies would be forced into bankruptcy without the loans.
McCotter was making a point that thousands would be out of work and unable to pay their mortgages, further straining the financial system and undermining the $700 billion Wall Street bailout, which was prompted by mortgage defaults.
"If we were denied the funds, it certainly would push us in that direction and possibly, even worse, to liquidation," Nardelli replied. "There's a million people, in our calculation, counting on Chrysler, point one, that certainly would be unemployed, and therefore run the risk of not being able to pay their mortgage."
Detroit's three automakers are seeking a total of $34 billion in low-interest government loans, with Chrysler and GM in danger of being unable to pay their bills by the end of the year.
In testimony before Congress last month, Nardelli said Chrysler ended the third quarter with $6.1 billion in cash, but during that July-September period it spent $3 billion more than it took in.
The automaker needs $4 billion to $5 billion per month to pay salaries, bills from parts suppliers and its other costs, Nardelli told a House committee on Nov. 18.
Chrysler's reorganization plan submitted to Congress on Tuesday said it expects to have $2.5 billion in cash at the end of the year, which Nardelli said this week is the minimum amount necessary to pay the bills.
He said he recently held an "all hands" meeting with senior leaders to urge them to "batten down the hatches even further trying to conserve cash."