US Auto Makers… BIG FAILURES!!!
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Democrats to automakers: Prove you can repay $25 billion
Automakers FAIL!
WASHINGTON — Democratic leaders in Congress called on Detroit’s automakers Friday to submit “credible” financial plans to lawmakers by Dec. 2 for spending up to $25 billion in government money, including vows for “significant sacrifices” by top executives.
A letter from House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., came just hours before the Wall Street Journal reported on its Web site that General Motors Corp.’s board of directors had put an eventual bankruptcy filing into its range of options.
The Journal, citing unnamed sources, said the board was willing to consider “all options” for GM, which has said it could be near the minimum amount of cash it needs to operate by the end of the year. The story said the board’s position on a potential filing put it in “rare disagreement with Chairman and Chief Executive Rick Wagoner.”
Wagoner had told Congress this week that bankruptcy is not practical for the company because people wouldn’t buy vehicles from a bankrupt company.
The Democratic congressional leaders’ letter didn’t ask for specifics for the data they sought, but spelled out several conditions for receiving a desperately needed lifeline.
Pelosi, striking a more positive tone after she and Reid rebuffed the automakers’ plea for rescue this week, said she was committed to bringing Congress back the week of Dec. 8 for some kind of vote. The details would be determined by the information automakers provide.
“I am very optimistic and hopeful that they have gotten the message that they just can’t come and say, ‘Give us this,’ ” Pelosi said Friday. “How do we tell the American taxpayer it was worthwhile to put this in not as a life support for a few more months and then they are back again, but as an investment in their viability?”
According to the letter, automakers will have to explain their financial position, how they plan to spend the money and the assumptions behind their assurances that any loan will be paid back. General Motors Corp., Ford Motor Co. and Chrysler LLC consumed nearly $18 billion in cash last quarter, and analysts have said GM and Chrysler could run short of cash by the end of the year.
The terms for any loan are to mirror the conditions set in a draft bill released by Rep. Barney Frank, D-Mass., earlier this week. Among them: The government debt takes precedence among the company’s other loans; automakers have to provide warrants or stock to the government, and if the automaker’s plan appears off track, the government can call its loan back immediately. Automakers also must promise to meet the fuel economy standards set in last year’s energy bill.
And Congress promises to limit executive pay, bonuses and other benefits of top executives, who were roundly criticized after flying corporate jets to two days of hearings this week and providing what many lawmakers called stilted, incomplete answers.
“In return for their additional burden, taxpayers also deserve to see top automobile executives making significant sacrifices and major changes to their way of doing business,” the two lawmakers said in their letter.
The automakers will submit their plans to Frank and Sen. Christopher Dodd, D-Conn., who are expected to hold another round of hearings in December. Pelosi and Reid said other agencies and outside experts would be asked to review the plans, which automakers have said could contain confidential business information.
Reid and Pelosi shut down a last-minute attempt at a compromise rescue Thursday, saying there were not enough votes in either side of Congress to pass a bill backed by Michigan’s Democratic senators and key Republicans. That bill would have taken $25 billion in loans for building more efficient vehicles that Congress approved in September and lent it to the automakers immediately, an approach backed by the Bush administration.
Pelosi again suggested Friday that the Bush administration had the power to help the industry without Congress acting by using money from the $700-billion financial industry bailout. She also suggested that the automakers’ finance arms could have access to an additional $25 billion under that program. And she promised not to use the $25 billion approved for retooling plants as a short-term lifesaver for the industry.
“It is like taking your kids’ college education fund and spending it on your credit card bills,” she said.
All Detroit automakers have committed to sharing their plans with Congress, but were seeking more guidance about how much detail they would need to share.
It was still not clear Friday whether lawmakers would question the basic business assumptions made by the automakers — who have said they don’t expect U.S. sales to rebound until 2010 at the earliest. Several analysts have warned that without steep cuts, Detroit automakers would continue burning through cash even when the economy revived.
Pelosi made clear Friday that she wanted proof the automakers were making progress on building fuel-efficient models, not just slashing costs to survive the roughest period in their history and using taxpayer dollars to bail water from a sinking boat.
“Their viability is not just about tightening the belt, which is important; it is about a decision to compete and to innovate,” she said, adding, “The behavior of the past generation in terms of Detroit has not produced the preeminence that we would like to see.”
But some of the toughest economic problems facing Detroit — such as whether the automakers should pare their dealer ranks, whose businesses are protected by a thicket of state laws — may be more than Congress wants to tackle before the end of the year.
Automakers said they would comply and meet the standard of proof Pelosi and Reid seek.
“We are ready to work through their concerns and to deliver the accountability the taxpayers deserve before committing support to the domestic auto industry,” said GM spokesman Greg Martin. “Our plan will detail a sustainable business model based on our current and future restructuring with new products and fuel-saving technologies.
Ford executives “will be reviewing the information requested and certainly plan to respond,” said spokesman Mike Moran.
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Tags: autos, bailouts, big 3, big 3 automakers, buick automakers, cadillac, chrysler, failures, ford, General Motors, mercury, us economy
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