Ahead of Hearings, Some Lawmakers Back Bankruptcy for Big Three
Ahead of Hearings, Some Lawmakers Back Bankruptcy for Big Three
Although Chrysler, General Motors and Ford are pushing hard for $34 billion in emergency aid, receptive Democratic leaders have made no commitments and reluctant Republicans are voicing opposition to a bailout
The Big Three automakers are preparing to make their final pleas for billions in government assistance this week, suggesting a dire future if nothing is done, but some conservatives argue that bankruptcy might be the best option for the companies and the country.
The automakers sent representatives to Capitol Hill on Wednesday to grease the wheels ahead of a two-day beg-a-thon in which the companies will ask lawmakers for up to $34 billion in emergency aid. The heads of Chrysler, General Motors and Ford are also offering a litany of concessions to make their proposals more attractive.
But so far receptive Democratic leaders have made no commitments and reluctant Republicans are voicing opposition to a bailout.
"I don’t see the upside to the obligating of more taxpayer money for a private industry," Georgia Rep. Tom Price, incoming chairman of the conservative Republican Study Committee, told FOXNews.com.
Price said Chapter 11 bankruptcy would allow the companies to reorganize, eliminate some of their debt and become more competitive, and "the longer they delay in moving in that direction, the more pain will be seen by the employees as well as the market."
Texas Rep. Jeb Hensarling, sitting chairman of the Republican Study Committee, said there’s still a lot of skepticism among House conservatives, even though nobody wants to see the Big Three fail. He said bankruptcy should be on the table.
"It’s painful, it’s not a fun process. But some actually end up leaner, meaner, more profitable, more healthy in the back end of the process," Hensarling told FOXNews.com. "I don’t buy into the fact that (bankruptcy is) simply not an option."
South Carolina Gov. Mark Sanford has taken the same position. The Republican governor lamented what he called a "bailout mentality" in an interview with FOX News.
"If we go far enough down this road, we move to a political economy rather than a market-based economy," he said. "And I don’t think that is a road we want to go down."
The Big Three automakers are working hard to convince lawmakers and their constituents that government aid is the only viable option for the survival of their industry, and the health of the American economy.
Determined to burnish their badly tattered images, Ford CEO Alan Mulally, GM CEO Rick Wagoner and Chrysler chief Bob Nardelli drove the 520 miles from Detroit to Washington in fuel-efficient hybrid cars for this week’s hearings.
Fritz Henderson, president and chief operating officer of General Motors, took to the TV airwaves to stress that bankruptcy is not a viable route. He said that path would further erode consumer confidence in the automaker.
Chrysler Vice Chairman Jim Press warned Wednesday that a carmaker collapse could have disastrous consequences.
"Our back is against the wall. If we don’t get through this at this point in time, as early as the first quarter of next year we could have difficulty paying our bills, which would have a catastrophic impact on our economy. It could make us fall into a depression, God forbid," he said.
Dan McGinn, an auto industry analyst and adviser to GM, gave a similar prediction.
"It’s a crisis. … This is going to be one of the most important votes these members of Congress ever cast. We’re talking about millions of jobs," he told FOX News. "Everybody is frightened by the prospect. If we lose any of these jobs, it could be the fastest road from recession to depression."
House Speaker Nancy Pelosi predicts a government "intervention" will happen. She, too, said bankruptcy is "not an option" and that she favors a short-term loan.
Senate Majority Leader Harry Reid, though, says his Democrats’ plan to tap the Wall Street rescue fund to save U.S. automakers from collapse is essentially dead. Reid said support in Congress is too limited to pass legislation to use some of the $700 billion financial sector bailout to help the teetering carmakers.
The Bush administration and auto state Republicans and Democrats are pushing instead to convert a $25 billion program to help the carmakers produce green vehicles into emergency loans to keep the Big Three afloat.
Democratic Rep. Paul Kanjorski of Pennsylvania, who was the only lawmaker to show up for the briefing with Chrysler representatives Wednesday, said he favors a short-term "bridge loan" to get the companies through the first quarter of 2009.
Sources familiar with the briefing told FOX News that many questions centered on why the automakers are looking for money when the parts manufacturers would be hit almost as hard. One source indicated that perhaps the parts makers should be making their pleas as well, since their production is integrated so closely with the industry.
"This is so serious to the country’s long-term ambitions as a major super power," Kanjorski said. But he added, "We’re not obliged to write a blank check."
He also pointed out that the CEOs of successful Japanese firms make a fraction of what American automaker CEOs earn.
As part of their proposals, the Big Three CEOs have said they will work for $1 a year. Ford offered to cancel management bonuses and salaried employees’ merit raises next year, and GM said it would slash top executives’ pay. Ford and GM both said they would sell their corporate aircraft.
Henderson said after the GM briefing Wednesday that "skepticism is healthy" among lawmakers.
The United Auto Workers union, scrambling to preserve jobs and benefits that could disappear with an automaker collapse, agreed at an emergency meeting in Detroit to delay the companies’ payments to a multibillion-dollar, union-run health care trust and scale back a jobs bank in which laid-off workers are paid most of their salaries.
Ron Gettelfinger, the UAW chief, said the union would go back to the negotiating table to consider further concessions to the Big Three.
Peter Morici, a University of Maryland business professor who testified at the auto industry hearings in November, called the UAW concessions "window dressing."
He said a Chapter 11 bankruptcy filing would likely hurt union benefits as well as the CEOs’ reputations, but that if handled delicately would allow the companies to reorganize their debt and emerge with lower labor costs. With tens of thousands of layoffs already being proposed by the companies, Morici said it makes very little differences to the workers whether their employers receive government aid or file for bankruptcy.
"This is not a bailout. This is going to be a slow-motion nationalization," Morici said. "If you give them money today, you’ll give money tomorrow and forever after that."
But he said the consequences would be disastrous if the Big Three automakers collapsed entirely.
One out of 10 U.S. jobs is auto-related. It is the largest manufacturing sector, and makes up 4 percent of the country’s GDP.
In blueprints delivered to Capitol Hill on Tuesday, GM and Chrysler said they needed an immediate infusion of government cash to last until New Year’s, and both said they could drag the entire industry down if they fail. Ford is requesting a $9 billion "standby line of credit" that it says it doesn’t expect to use unless one of the other Big Three goes belly up.
But Chrysler said it needed $7 billion by year’s end just to keep running. And GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit it might need if economic conditions worsen. The two painted the direst portraits to date — including the prospects of shuttered factories and massive job losses — of what could happen if Congress doesn’t quickly step in.
President-elect Barack Obama said it appeared that the Big Three chiefs are coming back to Congress with a "more serious set of plans" for how their companies are going to survive. But he reserved comment until he sees what the automakers propose during hearings Thursday and Friday.
The Senate Banking Committee is to hear testimony Thursday from the auto executives, Gettelfinger, and the head of the Government Accountability Office on the companies’ plans.
The House Financial Services Committee is to hold a similar session on Friday.
I watched the hearing with the "Big 3" CEOs, and it was disturbingly obvious that they were deeply immersed in the greatest misperception of reality of all time, AKA, the New [American] Paradigm, where everyone else on the planet works their asses off so that Americans, Then Entitled, can consume.
I am a teacher of physics, math, general science, and English. I have spent the last two decades working in Japan, South Korea, and at various schools in the U.S., and I can say without a hint of reservation: We are fuc*ed! (It’s all about education and a misguided sense of entitlement.)
The Koreans and Japanese have a saying: What the first generation earns, the third generation squanders. What we have created in the U.S. is a virulent, obnxious, and fatal strain of Third Generation-itis! That is to say, we have put a cadre of silver-spoon morons in charge of all the important decisions that were intended to be made on behalf of the nation; these intellectual and moral idiots have not and were destined never to have had, by misfortune of an easy birth, the sense that would be expected of slime. I think this a criminally under-appreciated point: these virtual children that occupy positions of power in the congress and the corporations of our country don’t have anything resembling common sense and an appropriate and necessary philanthropic attitude toward the general population–much less, the world in toto. They have spent their lives–almost to a one–satisfying their every personal whim and urge and being ostentatiously praised by similarly misguided and over-indulged colleagues-in-moral-deficiency such that they "could care less." Consider this: One in five Americans is mentally unstable (Do a Google search for confirmation…). I would claim that that ratio is closer to four in five when considering the CEOs and Politicos of our country; that is to say, in a world as dynamic, unpredictable, and complex as ours, it takes an individual with an extraordinary capacity for self-delusion to presume that he or she is the best candidate for the job; while I am in awe of America’s decision to elect a black man to the office (and prouder than ever of my country), I fear the first-term senator that is willing to presume himself to be the most qualified man available is simply the quintessential example of what is wrong with America.
And all that was said for the purpose of…? Well, what I would do with the "Big 3" as they presented their delusional selves before congress, men who are begging for funds to perpetuate the American Paradigm of disregarding reality and dissing the spoils of the grandfathers that never came home, would be simple: I would hang them publically–literally! America has gone so far afield from reality and social responsibility that it needs a wake-up call. A public hanging of three of the most egregious criminals of modern times might just get people’s attention…
Pre-eminent P.S. Please don’ t misinterpret the position above for lack of proper focus: I would first gather the Wall Street Club, allow them to watch as I flayed Paulson and Greenspan (I think Bernanke was in the wrong place at the…), and then hand them knives and offer the last one alive a pardon from Humanity.
Well said, sir.
I have or have never had any objection to public humilation and hanging of every fat cat extortionist that commits crimes against the very fabric of America. To sit in front of the entire American public, with a smug and arrogant above everyone else attitude, like Paulson, Bernanke, The big 3 CEO’s and countless executives back to the Keating scandal should be grounds for punishment on this fact alone.
The nerve and attitude of these kinds does nothing short of make me want to throw my TV out the window.
But they are banking (no pun intended) on the stupidity of Congress, as well as Americans in general. This is OUR Achilles heel so to speak. The education of all our generations, now and in the future, of what is the real truth is should be a number one priority.
As for the mental illness issue, I would attribute that to the drugging of all Americans, including our children. While I am not against medicine for treatment of depression or other much more serious mental issues, I surly think we are over medicating ourselves as a society based on money more than true professional diagnosis.
It’s even worse over here in Taiwan, because mental illness of any sort is considered weakness or generally people with any condition are outcasts. So we have a lot of mentally ill not properly treated because of shame, so sadly they turn to alcohol instead. One drug instead of another.
But the thing that disturbs me the most is why? Why are these people so greedy? I mean, I can relate to success and capital because we are all raised and conditioned to try and do our best, with best being money. But, I can’t even wrap my mind around the extremely high level of greed of some of these individuals.
I am an active trader, and have been for awhile. I have not got rich off it, but I have made some impressive money off the market. When I make a good decision on an investment, I get a good feeling. Maybe this is how we are all raised. When we get a raise, or make money off a sale of something, or simply a good tax return. It’s a basic reward mechanism on a higher scale, like cheese for the mouse. This group of people must suffer from some sort of mental dysfunction 1000 greater than the basic reward system typical Americans have, that causes them to have a constant hunger to feel important, have power, crush enemies and make more and more money regardless of how many people it hurts or families it destroys. To fly in the Lear jets, ride around in luxurious cars, eat the best food available, cheat on spouses, have scandals and many other things.
What disturbs me about these gluttonous pigs of people is how much is enough? What do they want? Is it control? Control of a nation and world unraveling? Is it power? Power for what? I could easily classify this as some sort of sickness that has not been identified yet. Like a compulsive gambler, alcoholic, drug abuser or whatever.
The game continues
Were I a cash-rich foreign producer, I would consider these hearings a road map and an invitation: A View to a Kill.
Hard to imagine long-term survival here unless the most competitive and capable companies in the world (Toyota, Honda, Nissan, Hyundai…) are intending to radically change course…