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Detroit begs for $25B bailout
Published Tuesday, November 18, 2008
WASHINGTON (AP) — Detroit’s Big Three automakers pleaded with a reluctant Congress Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, pointedly warning of a national economic catastrophe should they collapse.
Millions of layoffs would follow their demise, they said, as damaging effects rippled across an already-faltering economy.
But the new rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who don’t want to dip into the Treasury Department’s $700 billion financial bailout program to come up with the $25 billion in loans.
‘‘Our industry ... needs a bridge to span the financial chasm that has opened up before us,’’ General Motors Corp. CEO Rick Wagoner told the Senate Banking Committee. He blamed the industry’s predicament not on management failures but on the deepening global financial crisis.
And Robert Nardelli, CEO of Chrysler LLC, told the panel the bailout would be ‘‘the least costly alternative’’ when compared with damage from bankruptcy.
Sympathy for the industry was sparse, with bailout fatigue dominating Capitol Hill. Lawmakers bristled with pent-up criticism of the auto industry, and questioned whether a stopgap loan would really cure what ails the companies.
Banking Committee Chairman Christopher Dodd, D-Conn., told the leaders of GM, Chrysler and Ford Motor Co. that the industry was ‘‘seeking treatments for wounds that I believe to a large extent were self-inflicted.’’
Still, he said, ‘‘At a time like this, when our economic future is so tenuous, we must do all we can to ensure stability.’’
Sen. Mike Enzi, R-Wyo., complained that the larger financial crisis ‘‘is not the only reason why the domestic auto industry is in trouble.’’
He cited ‘‘inefficient production’’ and ‘‘costly labor agreements’’ that put the U.S. automakers at a disadvantage to foreign companies.
Ford CEO Alan Mulally told senators the auto industry was ‘‘a pillar of our economy. We look forward to working with you to be part of the solution’’ to the financial crisis.
GM’s Wagoner said that despite some public perceptions that his company was not keeping pace with the times and technological changes, ‘‘we’ve moved aggressively in recent years to position GM for long-term success.’’
‘‘What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II.’’
Failure of the auto industry ‘‘would be catastrophic,’’ he said, resulting in three million jobs lost within the first year and ‘‘economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis.’’
Chrysler’s Nardelli sought to respond to critics who suggest the automakers seek Chapter 11 bankruptcy protection, as have some airlines that later emerged restructured and leaner.
‘‘We just cannot be confident that we will be able to successfully emerge from bankruptcy,’’ Nardelli said.
Chrysler was bailed out by the federal government once before, in 1979, with $1.2 billion in loan guarantees. The company repaid the loan, plus interest, ahead of schedule.
The three said a $25 billion government infusion could get them through 2009, with Chrysler and Ford each getting about $7 billion and GM needing $10 billion to $12 billion to pull through.
Joining the Big Three CEOs, Ron Gettelfinger, president of the United Auto Workers union, said the emergency loans were important for the survival of the industry and union jobs. He said the UAW recognized that ‘‘in order for these companies to be competitive, we had to make tough calls’’ in labor concessions.
Congressional leaders worked behind the scenes trying to hammer out a compromise that could speed some aid to the automakers before year’s end. But the outlook seemed poor.
‘‘My sense is that nothing’s going to happen this week,’’ Sen. Bob Corker, R-Tenn., said at the opening of the hearing.
Democratic Sen. Max Baucus of Montana said he also smelled a flameout. ‘‘I sense that nothing is going to be passed,’’ the Finance Committee chairman said.
Earlier, House Majority Leader Steny Hoyer said Congress might have to return in December — rather than adjourning for the year this week, as expected — to consider an auto bailout.
‘‘Dealing with the automobile crisis is a pressing need. We are talking about a lot of people ... and a great consequence to our economy,’’ said Hoyer, D-Md.
The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year’s end without government aid.
In the Senate, Democrats discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to tide them over financially until President-elect Barack Obama takes office.
‘‘There is a way to do this,’’ said Sen. Mitch McConnell, R-Ky., the minority leader.
House Speaker Nancy Pelosi, D-Calif., and other senior Democrats, who count environmental groups among their strongest supporters, have vehemently opposed that approach because it would divert federal money that was supposed to go toward the development of vehicles that use less gasoline.
‘‘I don’t think that’s going very far in our caucus,’’ said Senate Majority Leader Harry Reid, D-Nev.
Instead, they want to draw the $25 billion directly from the $700 billion Wall Street bailout — bringing the government’s total aid to the car companies to $50 billion.
A Senate vote on that plan, which would also extend jobless benefits, could come as early as Thursday, but it currently lacks the support to advance. Treasury Secretary Henry Paulson renewed the administration’s opposition on Tuesday.
Even the car companies’ strongest supporters conceded Tuesday that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape.
‘‘While I believe we have to have retooling going into next year, if in the short run the only way we have to be able to get some immediate help is to take a portion of that, I would very reluctantly do that — but only because I believe President-elect Obama is going to be focused on retooling and on a manufacturing strategy next year,’’ said Sen. Debbie Stabenow, D-Mich.
The White House said the government shouldn’t send any more money to the struggling auto industry on top of the already-approved loans.
‘‘We don’t think that taxpayers should be asked to throw money at a company that can’t prove that it has a long-term path for success,’’ said White House Press Secretary Dana Perino.
———
Associated Press Writers Ken Thomas and Tom Raum contributed to this story.
Comments
Posted by presby (anonymous) on November 18, 2008 at 11:18 p.m. (Suggest removal)
I would rather see them bailout the auto industry than the Jesse James gang that robbed us blind with the loan scams...
Posted by stateofnatchez (anonymous) on November 19, 2008 at 12:11 a.m. (Suggest removal)
What's the difference between bailing out Wall St and domestic automakers. The majority of today's domestic vehicles are not built and assembled to standards and tolerances that can last. Failed business models lead to less consumer confidence.
I've never seen any circa post-80's Ford-Chevy-Dodge outlast a Toyota-Nissan-Honda in any manner
If you build a vehicle that can last within reasonable limits then you "earn" the public's business. If not, then you go back to the drawing board or shut down.......
.......But regardless, ALL automakers will be looking for a handout once the money starts rolling out.
Posted by bayougal (anonymous) on November 19, 2008 at 8:55 a.m. (Suggest removal)
The solution is staring Congress in the face, but, having pledged their tails to "enviromental groups" who are big time support for them, they cannot commit to allowing access to 25 BILLION dollars which could put this issue to rest temporarily. Yes, temporarily. I'm sure before all is said and done other measures would come before them to be settled.
However, if they allow the "Big 3" to fall, they will be facing things they only have nightmares of. Let's remember too, that Honda, Toyota, Nissan and other foreign automakers that came to our country to start manufacturing only did so
because of the base support structure set up by the domestic automakers. If they fall, that structure will tumble too. I wonder how many new plants the foreign companies would open then?
I believe I've read where reps from the foreign automakers agree with the need for Congress to step in and help the "Big 3". I just wonder why???
Posted by Yeahuhuh (anonymous) on November 19, 2008 at 9:01 a.m. (Suggest removal)
I don't see where environmental groups threaten Detroit. They are a path to the future. Both on emissions and on economy.
Bush should not have held off so long by encouraging consumption of oil and gas and in making the guzzlers. Now the auto makers will have to re-tool, which they should have done years ago.
The good of a bailout for them cuts both ways. Either way we pay eventually in reduced value of a dollar if government is involved. Loans, maybe or something creative, instead of a bailout.
Posted by bayougal (anonymous) on November 19, 2008 at 9:36 a.m. (Suggest removal)
The $25Bl is already there. It has strings attached. During the current crisis, the overriding need is for Congress to put priorities in line. Keep these major companies operating and then deal with enviromental issues.
By the way, we are already seeing a drawback by Toyota and other foreign automakers in US auto markets. They have announced temporary cutbacks and layoffs until the market settles. They are closely watching what the US will do to support their domestic automakers.
I've owned both foreign and domestic autos. The domestics are by far the safest.
Posted by Bozo (anonymous) on November 19, 2008 at 4:51 p.m. (Suggest removal)
I read today, one of Detroit's carmakers pays $78 an hour in pay and benefits. Toyota pays $35 an hour. Until they get their unions under control and house in order, screw'em.
Posted by sayitloud (anonymous) on November 19, 2008 at 5:20 p.m. (Suggest removal)
Oh they will get their bailout folks....remember that was one of the promises Obama made to Michigan to get elected...he promised to help them out so they WILL get this bailout.
Posted by sayitloud (anonymous) on November 19, 2008 at 5:48 p.m. (Suggest removal)
I didn't say I LIKE the bailout...just that they will get it.
I was a McCain/Palin supporter.
Posted by sammohon (anonymous) on November 19, 2008 at 11:13 p.m. (Suggest removal)
Talk about arrogance, each of the CEO's who spoke to Congress today flew in on private charter jets in order to beg for money...if I were a Congressman I would be underwhelmed...now it they had come in a new, state-of-the-art hybrid I might give them the time of day, but...they cut their own noses off. The big three are basically shills for the UAW anyway...unless, and until, the UAW recognizes that they are risking their rank and file folk's jobs in a big game of chicken nothing will happen...as was evidenced today.
Posted by presby (anonymous) on November 19, 2008 at 11:52 p.m. (Suggest removal)
Take them out of the Cadillacs and put them in a Toyota Corolla.. Most All members of Congress,Senate,a lot of higher ups are NEVER affected by any thing they pass or giveaway.They could care less,even their sincere bull and meetings where they threaten folks is all a bunch of hogwash and lies.What they do in front of the camera,s is all fake. All of them gather later at a fine resturant and laugh about how retarded the public is, which is exactly what lawyers do after a big case,soon as they walk out the door they are hugging each other and smiling like nothing is wrong. Does anyone really beleive anything politicians say in front of a camera,hell they are all involved and profiting big time..They need to cut all the spending starting with lowest congressional earner and go UP the ladder. Cut out all the frills,,,,all of it..WHO is gonna BAIL us out when we can,t pay our bills.????
Posted by presby (anonymous) on November 19, 2008 at 11:54 p.m. (Suggest removal)
If General Motors,Ford,Chrysler goes bust,so will this country and it will go fast.I would have bailed them out first and let the hardy party bonus guys that took all the bad loans from the banks and ran a scam on the public drown.
Posted by MSviaTN (anonymous) on November 20, 2008 at 7:43 a.m. (Suggest removal)
I heard on the news this morning that they spent over $60,000 just to go to Washington!! That's INSANE!!! The first thing they need to do is get rid of the ones who planned that trip - its obvious they have no clue on how to manage money!
Posted by USMBOY (anonymous) on November 20, 2008 at 1:19 p.m. (Suggest removal)
What about the people who work for these companies and their families. Thats a million people without jobs. A million people who don't have money to buy from a million different small businesses. Everybody will take a hard loss. If the government doesn't bail them out, it will make the economy even worse.
Posted by iameubu (anonymous) on November 20, 2008 at 9:44 p.m. (Suggest removal)
General Motors yearly expense for Viagra, $20 million
Trash Hauling Incs'. yearly expense for Viagra $0.
I admire the guys that ride on the back of garbage trucks. Think about it. They spend the entire day working their butts off running behind trucks, picking up anywhere between 10 to several hundred pounds of crap every 100 feet along every street in town, lifting it 4 feet off the ground, and tossing it into the back of the truck. Hard, honest work. Don't know how much they're paid, $8/hr. Maybe?
United Auto Worker spends the day putting the same dashboard in the same vehicle over and over again. $78/hr.
Laid off UAW worker in the Jobs Bank program spends his day working crossword puzzles, playing cards, reading the days paper looking for other "suitable" work, etc. $40/hr.
Which of these guys feels like a real man when he goes home at night?
Which ones need a little "help"?
Posted by sayitloud (anonymous) on November 21, 2008 at 6:24 a.m. (Suggest removal)
yes iameubu yal do a great job.
I tell ya if they get that bailout of MY money I'll just mosey over and pick out my new car.
Posted by jammin1 (anonymous) on November 21, 2008 at 11:57 a.m. (Suggest removal)
Will it be hard on our country and people if the Big 3 go down? YES! Will it bust the unions? YES! Sometimes you have to break a few eggs to make an omelett.
The CEOs and the rest of management need to lower their salaries & bonuses and the workers need to be able to keep all the money that they are FORCED to pay to the unions and then maybe we could compete with the rest of the world and still make a decent wage.
As for the question I read about why foriegn cars cost about the same as those made here it is because of taxes imposed on imported goods. This is done to keep prices of American goods competitive INSIDE the US.
Posted by presby (anonymous) on November 23, 2008 at 10:59 p.m. (Suggest removal)
GIve it to them..we gave it to the miiion dollar wall street party guys..they are still getting million dollar bonuses and partying
Posted by generalironeagle (anonymous) on November 24, 2008 at 12:11 p.m. (Suggest removal)
I am so tired of seeing the rich bailed out while your every day working stiffs are hung out to dry.
One thing about it...when it all goes belly up, the poor are gonna survive because we know how ..the rich may have to come to us and pay for survival lessons.......hmmmmmm
a country boy can survive..i can skin a buck and run a trot line.....
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