Auto Bailout: Seeking Signs of Sacrifice
From left: UAW President Ron Gettelfinger, Chairman and CEO of General Motors Richard Wagoner, Chairman and CEO of Chrysler LLC Robert Nardelli and President and CEO of the Ford Motor Company Alan Mulally. Photo by Chip Somodevilla/Getty Images
House members push for workers to give up some pay and benefits, and ask why executives still don’t seem to get the need for change
Maybe it would have been a good idea for the chief executives of the U.S. Big Three auto companies and the president of the United Auto Workers to save a few dollars and share a ride to their appearance before Congress, where they are asking for at least $25 billion to keep from going bankrupt.
Three different members of the House of Representatives pointed out on Nov. 19 that the three CEOs and the union chief were flown to Washington in separate, private planes. The representatives used that example to express skepticism that the executives are prepared to make the needed changes in their operations, accountability, and culture to turn around their sinking industry.
“As CEOs of your companies, you should set the standard here of what the future looks like,” said Representative Gary Ackerman (D-N.Y.).
Outside the House Financial Services Committee hearing chamber, hallways were abuzz with rumors of dealmaking and jawboning over an auto rescue plan. But House and Senate leaders publicly expressed doubt that legislation would pass this week to free up $25 billion in loans. Indeed, a vote on a proposed bill was canceled because a so-called “test vote” Wednesday showed it wouldn’t pass.
Part of the problem for lawmakers who oppose an auto industry bailout is their conviction that $25 billion won’t be enough. “I’m not convinced that this money won’t be throwing money at a problem that won’t be fixed,” said Representative Spencer Baucus (R-Ala.),
“Careful Deliberation”
Representative Paul Kanjorski (R-Pa.) said he would consider voting for some provisional funds to the industry. But he wants to take up to three months, into the next Congress, to debate a more detailed bill that would emphasize accountability, oversight, and conditions. “The American people expect and deserve careful deliberation from this body, rather than a blessing of last-minute expedient deals,” said Kanjorski.
General Motors (GM) CEO G. Richard Wagoner Jr. called his company’s need for funds “more urgent than that.” Both Wagoner and Ford (F) CEO Alan Mulally acknowledged they have run models with their companies entering Chapter 11 bankruptcy reorganization. Their conclusion? “It’s not viable,” said Mulally.
House Banking Committee Chairman Barney Frank said he did not view Chapter 11 as an option for the automakers and admonished those who view bankruptcy as a way of breaking the UAW. “We already have too much union busting,” said Frank.
Despite the apprehension in helping the auto industry, there is also a widely held belief in Congress that a combination of deals will ultimately buttress the companies. “In the end, they [enough members of Congress and the Treasury Dept.] will rally and you will get what you want,” said Representative Maxine Waters (D-Calif.).
Wage Limits
At the same time, the outlines of stringent conditions on any loans are also taking shape. Some have called for new management atop the auto companies. After the House hearing, GM’s Wagoner told Bloomberg
And starting in 2010, the UAW will be in charge of handling its own health-care fund, albeit after billions of dollars in contributions from the automakers.
Members of Congress were clearly looking for sacrifice from the union’s older workforce and retiree pensioners. “The average family of four in my district makes $36,000 a year, and I find it difficult to ask them to fund much richer salaries and health care of workers in other states,” said Walter Jones, Republican Representative from North Carolina.
UAW President Ron Gettelfinger shot back with the concessions the union has made in the past two years. “The UAW is not the low-hanging fruit here,” said the union chief.
For the second straight day, members of Congress asked the CEOs if they would limit their own salaries. The suggestions ranged from $1 million a year as suggested by one congressman to $1 a year for the next year or two as suggested by another. Only Chrysler CEO Robert Nardelli agreed, while GM’s Wagoner and Ford’s Mulally sidestepped the question.
Senator Carl Levin (D-Mich.), who testified in the House after missing the Senate hearing on Nov. 18, made an impassioned plea to House members who oppose the bailout. He cited the fact that President George W. Bush, Treasury Secretary Henry Paulson, President-elect Barack Obama, and Senate Minority Leader Mitch McConnell all agree the auto industry should be helped. “The argument is only what source of money it is,” said Levin.
Levin has been careful to acknowledge, and even substantiate, the heavy criticism against the auto industry by members who oppose the auto loan program, even while arguing for protection of jobs.
“Blame them…for the quality problems of the 1970s, or for paying their executives and their workers too much…but don’t throw out millions of jobs, a vital segment of our industrial base, and our economy…in your frustration,” Levin said.
GM’s Advertising Push
GM has been running an ad campaign this week aimed at updating lawmakers and staffers about the quality improvements and fuel-efficient vehicles the company has been making. It launched a Web site, gmfactsandfiction.com, and has taken out ads in newspapers directing the public to the site.
The automakers have enlisted their dealers to pepper lawmakers with support for government auto loans, and GM has even asked its customers to contact lawmakers.
“I don’t blame them…every lawmaker is hearing about this issue and the more they hear from people supporting it, the better it may turn out,” said Senator Chris Dodd (D-Conn.), chairman of the Senate Banking Committee.
Officials at GM privately say they are “war-gaming” options to maintain a minimum amount of cash liquidity to sustain operations for the next three months.
The expectation is that the Obama Administration will be more willing than the Bush White House to tap into the Treasury’s $700 billion financial bailout fund to help the auto industry. There will be around $400 billion of that money left when Obama takes office. But the new President will still have to go to Congress to get it released.
via businessweek
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The headline captures the key problem here: there are no signs of sacrifice. These companies need to step up with across the board salary and wage cuts, for all involved, white and blue collar, top to bottom.
Normally these companies might fear that people would simply leave if salaries were cut. But with the job and housing markets what they are around Detroit–I live in the area–there’s little risk of this.