Pelosi Pledges Aid To Automakers, Strings Attached

WASHINGTON — House Speaker Nancy Pelosi said Saturday the House would provide aid to the ailing U.S. auto industry, requiring that the industry meet new fuel-efficiency standards, produce advanced vehicles and restructure "to ensure their long-term economic viability."

Pelosi, D-Calif., did not disclose the amount of funding House leaders intend to seek for the industry _ automakers have been seeking $25 billion in loans to stabilize their sinking companies. But she said the funding should come from the $700 billion financial bailout approved by Congress in October.

"A restructured, competitive American automobile industry will continue to play a crucial role in our national economy and in the global marketplace," Pelosi said in a statement.

The move sets up a conflict with the White House, which has opposed using the bailout funds to help General Motors Corp., Ford Motor Co. and Chrysler LLC. The Detroit companies have been battered by an economic meltdown that has choked their sales and frozen credit.

U.S. automakers are lobbying lawmakers furiously for an emergency infusion of cash. GM has warned it might not survive through year's end without a government lifeline.

President-elect Barack Obama said he believes that aid is needed but that it should be provided as part of a long-term plan for a "sustainable U.S. auto industry" _ not simply as a blank check.

"For the auto industry to completely collapse would be a disaster in this kind of environment," Obama said in an interview with CBS's "60 Minutes" that will air Sunday. "So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan _ what does a sustainable U.S. auto industry look like?"

Pelosi said the plan would call for "immediate, targeted assistance" and must include several principles, including the restructuring of the companies "to ensure their long-term economic viability," new fuel-efficiency standards, and the development of advanced vehicles.

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She said it would include "even stronger limits on executive compensation and assurances to protect the taxpayer." House aides said the legislation was still being developed and a specific funding level had not yet been reached.

Pelosi did not mention any plans for the UAW to make any concessions as part of the legislation. UAW president Ron Gettelfinger told reporters earlier Saturday the problem is not the union's contract with the auto companies.

"The focus has to be on the economy as a whole as opposed to a UAW contract," Gettelfinger said. The union has said it made several concessions in its 2007 labor agreement, setting lower pay for new hires and placing retiree health care liability into a trust run by the UAW.

Facing an uphill battle in Congress and stiff opposition from President George W. Bush, supporters of the government bailout have considered reducing its $25 billion size. A House aide said Saturday that $25 billion was still the amount being discussed.

"There's a need for immediate action," Alan Reuther, the United Auto Workers union's legislative director, said Friday. He said one option under consideration was a smaller, more targeted amount of funding "that would get the companies through to March."

Sen. Debbie Stabenow, D-Mich., said negotiations were taking place among senators on what the amount should be. "This is about getting enough votes to be able to solve the problem," she said.

Other auto suppliers and dealers with showrooms empty of customers plan to join the effort Monday when Congress returns following the Nov. 4 elections. The key Senate vote on preventing opponents from blocking the package could occur as early as Wednesday.

Democrats want to carve a portion of the $700 billion that the Bush administration is using to bail out banks, insurance companies and other financial institutions. The White House on Friday came out firmly against the approach.

White House press secretary Dana Perino said the administration would rather Congress expedite the release of a separate $25 billion loan program for the development of fuel-efficient vehicles and have the loans used for more urgent purposes as the companies struggle to stay afloat.

"Democrats are choosing a path that would only lead to partisan gridlock," Perino said.

Pelosi said Saturday that any attempt to divert money from the loan program would be a "step backward in assuring the viability and competitiveness of the U.S. auto industry."

Environmentalists and Pelosi have vehemently opposed using that money for anything other than designing and building vehicles that get higher gas mileage and produce less pollution. Democrats hold a 37-seat majority in the House and bailout supporters foresee little difficulty winning its passage there.

But the measure needs 60 votes to survive in the Senate, where Democrats will hold a razor-thin 50-49 majority when President-elect Barack Obama gives up his seat on Monday. A furious search was on for a dozen Republicans to break the anticipated filibuster from opponents.

Several Republicans have already lined up against it. "Like most Americans who are concerned about the direction of our economy and more federal spending, I must also ask _ when is enough, enough?" said Sen. John Cornyn, R-Texas.

Two Republicans _ Kit Bond of Missouri and George Voinovich of Ohio _ said they will back the plan. Several other Republican senators have signaled they might accept a rescue if strict conditions are put on Detroit's Big Three companies, including management and salary changes, union concessions and a commitment to making more fuel-efficient vehicles.

Bond, whose home state of Missouri has several auto plants, said the concept of government mixing with the free market was "very troublesome." But he added, "We have to act in unique times of crisis when tens of thousands of Missouri workers are in danger of losing their jobs."

Democrats are modeling their bill on the bailout terms that the Bush administration has used for doling out $290 billion to banks and insurance companies. The government would get an ownership stake in the auto companies in exchange for the loans to ensure that taxpayers would get their money back if they return to profitability.

Comments

[concernvoter]

Itsmyland2, I agree with you. The oil industry needs to do something, because they ripped us off to.

[bluescat47]

It would be helpful if Pelosi acknowledged one unpleasant reality: "restructuring" means, among other things (controlling exec pay and bonuses,etc) closing plants and laying off many auto workers. That is inevitable no matter what happens. To pretend otherwise is fantasy on the part of the Dems, although no politician wants to say it publicly and incur the wrath of future voters in Michigan and Ilinois.
GM has 21 plants; estimates are that half of them will have to go. If the U.S. auto industry is to be saved, it will be a leaner, downsized version. They will never duplicate their sales of 17 million vehicles of a year ago; they are down to about 11 million units a year now and falling.

[riverhouse]

GM simply cannot be allowed to go under. It would be the final blow to American prestige at a time when we are very short on that commodity. GM has represented the best of American commerce for decades. Granted they have failed spectacularly since the '70s and they must be restructured with innovation and a tight rein on outlandish executive compensation, but no one during the Second World War did more for the war effort and to ensure American victory than did GM which retooled and scrambled in all ways possible to provide the equipment and material the military so desperately needed to succeed in war time. To give up on GM now would be to concede the end of American innovation and revival, not to mention the loss of 3 to 6 million jobs across the spectrum. We have to come to GM's rescue. We just need to do it sensibly and with complete oversight.

[WritusMaximus]

Don't like the idea of giving the money FIRST, then trusting the big three to do the right thing AFTERWARDS. In summation, er, addition, the union chief is already on record as blaming everybody else but the union for the mess the big three find themselves in. Yup, don't expect shared sacrifice from the union, which is a very, very, very bad sign by itself. This bailout looks a lot like the bank bailout, where Congress and Obama assured us that there were safeguards in place to make sure that Paulson wouldn't run amok and the tax payer wouldn't get ripped off. Guess what? Paulson ran amok, spending $290 billion, no strings attached/without answering to anybody. Count on additional billions (perhaps trillions) to be spent in the very near future.

Congress and Obama were fooled once. Will they be fooled again?

[Itsmyland2]

Let the oil companies bail out the auto industry. It's Big Oils control that has allowed them to continue to make huge gas guzzling beasts and not create hybrid technology that we need. GM has some hybrids (I have a Hybrid Saturn Vue) but there are very few options beyond that.

I we as taxpayers must bail out these business giants, they need to give us something back - Affordable efficient automobiles and MORE jobs in the industry.

[SouthFloridaDem]

There's got to be something like that going on, I've always wondered about the real behind-the-scenes relationship between automakers and oil companies. There's no other way to explain why automakers refuse to produce fuel-efficient cars in the US when the rest of the world gets way better mileage than we do. It mirrors our pharmaceutical problem, how we pay exhorbitant prices for prescription drugs while they're far cheaper in other countries (i.e., prices aren't controlled in the US, and since we don't have a universal health system with government backing, there's no one to negotiate prices and keep them low).

[LazarusLong]

So let's see. We loan the auto industry $25B and demand that they take the necessary steps to become competitive with advanced, high efficiency vehicles.

Then we find out that the Big 3 don't know HOW to design automobiles that are efficient, comfortable, attractive and have high enough quality that they don't cost a fortune in maintenance.

Who's going to buy these vehicles that will return the automakers to profitability ?

How do we get our $25B back if they can't design vehicles that people want ?

The auto companies need to come up with a new "Business Plan" and submit it to congress as a potential investor. Why are our lawmakers spending their (our) time instructing one of the nation's largest industries how to run a successful business ? If they can't figure out how to be competitive on their own, a loan is just a waste of money.

[SShaw490]

That's ridiculous. In WW2, the auto manufacturers switched from building cars to building tanks and airplanes - and we wouldn't have won the war any other way. If you can switch from cars to airplanes, a switch from a pickup to a fuel efficient small car is child's play. They can't do it overnight and they can't do it without capital, though.

People keep forgetting our history in terms of gasoline pricing. Every few years, we have an oil price spike that sends gasoline prices soaring, followed in rapid succesion by a sudden drop in prices - and every time that happens, people scream at Detriot that they should build smaller, more fuel efficient cars. Well, in the absence of any public policy that will reduce our consumption of oil, those gas prices are temporary and the small car market quickly reverts to pickups and SUVs. This time, we have a chance to do it a different way, and to create a permanent small car market - and if we do, and if the Big 3 survive, they'll build some of the best ones ever built on Planet Earth.

[LazarusLong]

The WW2 tanks and aircraft were built for warfare, not free market consumption.

It's not the production capacity/capability, it's the engineering/design.

And you're right - they can't do it overnight. How long do we wait for a return on our $25B investment?

[strangerinthenight]

'am not the voice of 26-years-old generation, but as the next consumers to fuel the economy, we should have a say. In VERY distant past, our parents and grandparents bought US made cars. Today, we buy Toyota or Nissan. I drive a 09 Toyota Sequoia, my entire family, and Dad's business. At any given time, Tundras comes in and out of Dad's business place. No reason to buy GM/Ford/ Chrysler gas guzzlers. NONE.

. The Sequoia fits my lifestyle, i.e pocketbook. Beyond that, Toyota's are very efficient, reliable and well made. Detroit is in trouble because of it's own doing - poor fuel efficiency, and TOTAL JUNKS underneath the hood. Japanese, Korean cars are so far advance in fuel and auto technologies. Blame the declined on BIG 3 CEO's and UNIONS - benefits packages, sick time, lifetime health insurance, high wages, and WC sucked all their profits, none left to advance technology.

I hate to say it but, GM/Chrysler/Ford combined direct/indirect workers are too huge to go down. That kind of job loss is fatal. These FORKERS know it, they arrogantly marched to Congress with their BIG HATS on their hands. A-HOLES !

It should be made clear to Mullaly et al, THIS IS NOT WELFARE, NOT A FREE RIDE. Call it an INVESTMENT, and we expect RETURNS. We should be able to direct what they do in every aspect of the business - subsidize fuel efficient cars and advance technologies and curb out Union greed.

[MurrayAbraham]

As Bill Ackman pointed out on Charlie Rose the other night, it seems to that a structured bankruptcy (the shareholders get wiped out and the creditors become the owners) of at least GM would be a better course of action than any bailout.

Taxpayer money shouldn't be used to maintain an unsustainable capital structure, but could be used for workforce retraining and/or R&D investments via preferred stock.

[bluescat47]

I think the problem with that is twofold: no one is going to buy a car from an auto company that is in bankruptcy procedings. That would be the death knell of GM or Chrysler. Also, once in bankruptcy procedings, it is hard to get out. Delphic auto parts undertook this option three years ago- and they are still in limbo.

[SShaw490]

I just don't see that working. A GM bankruptcy would envolve obtaining DIP financing for a long enough time period to see them through until they could become cash flow positive again - and with the low value of their hard assets, going to a bank and trying to arrange that would be very iffy. If they try to go that route and don't succeed, there is no choice but to simply close the doors, which will create a domino effect and likely bring down the other two manufacturers, which would in turn result in the loss of 3 million + jobs, a huge hit to our country's GDP (probably around 7% or more), and the subsequent bankruptcy of many of the automakers' creditors. And instead of having 3 million productive, creative Americans paying income taxes, you'll have 3 million Americans that we'll have to find a way to support on some kind of subsistence level to keep them from starving and freezing. In any economic environment, it would be a terrible hit. In this environment, it would be catastrophic. In this environment, it would absolutely lead to a depression that would last for many years.

People who think the Big 3 "deserve to die" aren't thinking it through very well, or else they're the same kind of people who think we should "nuke Iran". They're condemning an entire society for the sins of a few. And, just to add another cliche', they're cutting off their nose to spite their

[riverhouse]

Those shareholders you don't seem to mind being wiped out are all the 40iK owners, mutual fund owners, retirees and small investors who have their life savings for retirement and for their kids' college education invested in the market. Let's not be too cavalier about letting tens of millions of Americans' life savings taking a bigger tumble than already has occurred.

[strangerinthenight]

My immediate response after the announcement that the Big 3 were in deep trouble was to let them go down. The option that Ackerman proposed made sense in some ways - that is, packaged bankruptcy will essentially wipe out their debts, and give them time to re-organize it's management, curb out inefficiencies, re-structure wages and Union benefits. Ackerman points out that GM and Chrysler are essentially bankrupt anyway, too much debt, and unable to borrow money because its rating had been downgraded. It's not likely that 100b will help them. So why put more monies if the capital structure is not sustainable. Ackerman posit makes sense.

GM/Chrysler stocks are worth $2-3, and worst, its combined debts is unsustainable, and its assest and equity is way too much leveraged by its debts. Who wants to buy them ? Even Buffet will not buy the company for $2-4 billions. So Ackerman's posit - putting more monies will not help them.

My only issue with Ackerman is the loss of hundreds of thousand of direct/indirect job loss while they are re-structuring, re-organizing, and subsidizing new technology for new cars. And for how long ? It's sink or swim.

[ATruthBeKnown]

Here are my conditions for a bailout:

1. All management salaries less 10% are frozen for the next 5 years
2. All management bonuses/options or other compensation are gone for the next 5 years
3. More than 75% of car and truck models must be 30 mpg within next year 40, following, 50 following
4. 10% of car/truck models offered must be capable of CNG within 1 year, 20%, 2 years, 50% 3 years
5. All managers that leave within the next 5 years will forfeit ALL bonuses rights to any options or bonuses earned in the past five years.The disposal of all bonuses/options is prohibited during the next 5 years.
6. Should the company performance meet the above criteria. then all bonuses and options will be restored and retroactive for the past five years.
7. The existing CEO, BOD and top 2 levels of management must resign.
8. Progress reported to OMB every 30 days.
9. Contract violations are a felony punishable with a5 year in federal prison sentence for each count to be served consecutively.

That's my minimum offer ...... Ford, Chrysler, GM what your counter ?

[whatsthatsound]

Those are exactly the kind of conditions that the government needs to impose on the big three (stooges). Non-negotiable, part of the package. Take it or leave it. And it should wait until Obama is in office because the Bush administration is incapable of cutting an honest deal or one that helps anybody who isn't at the top of the food chain.

[ThunderMongoose]

+1
I like the resigning of upper management. I think they should take responsibility for it to begin with. If I lost my company THAT much money, don't you think I'd get canned? YES!

Good ideas, hope some gov't big-wigs read it ;)

[957]

10 . Get rid of the unions. auto workers don't need to be making 30 an hour, a retirement, medical package that would make a politician happy. Oh and they should consider making a vehicle people want to buy.

[riverhouse]

Union workers are Democrats. Let's not forget that pertinent point. You should suspiciously like a ditto head.

[boing007]

957

10 . Get rid of the unions. auto workers don't need to be making $30 an hour, with a retirement medical package that would make a politician happy. Oh and they should consider making a vehicle people want to buy.

Baloney. $30 dollars an hour isn't that much money. It's come out to about $50 or 60 thousand a year before taxes. Four 6 hour shifts a day might be a good idea. Recycling, energy efficient plants, and who knows what else to cut costs.

[starlady7]

UNION Workers have already accepted a 50% cut in pay and cut in benefits!!! Their pay has dropped from $28/hr to $14/hr. The fault is Not the unions!!! If we didn't have unions, manangement would walk all over the worker as they did in the early 1900's. Union are responsible for bringing in safety standards in the work place and a living wage for workers!!!

Manangement has for years resisted going to smaller more fuel efficient vehicles! They can switch to the NEW GREEN intiatives as a demand in return for the bailout like was done inWWII to switch to military tanks, vehicles, and planes. Their transition then did not take years! They switched immediately!!!

[Killjoy]

Its going to be a very interesting year in 2009.

[SwingingFromCenter]

The solution with the automakers is simple.

Give the automakers the money they need on the condition they use it to go strictly into hybrid technology, and to lower/subsidize the cost of the vehicles with the money (i.e. sell the vehicles dirt cheap to consumers as a result of the bailout money to the automakers.

So the automakers start selling vehicles again. The price of gas continues to drop as consumers drop gas guzzlers for fuel efficient cars, and consumers get great bargains on vehicles.

Heck, it's our tax dollars anyways.

[metalpipe]

That would be great if these losers had the hybrids available.

[billysviez]

with millions of job at risk we need to help the Auto Industry. 25 Billion is a drop in the bucket compaired to what Haliburton, Blackwater and the Carlyle group have stolen from us. Paulson will give the 700 Billion bailout to all of the rethug friends of the chimp, darth cheney and will do nothing for We The People. the only way to stop a thief is Trial and Jail. Pelosi will find a way to screw this up to help bush& co. what a disgrace she is to My Country.

[harriscrl3]

I dont understand why they cant use the 700 billion dollars that we've already given Paulson. I thought the purpose of that is to unfreeze credit and help stabalize the markets seems to me that if GM and the other manufactures go under it will cause the market to tank.

This just convinces me more and more Paulson should go. I hope Obama doesnt plan on keeping him on. He is inept and power hungry.

Carol

[metalpipe]

The term control freak comes to mind

[riverhouse]

I think the money under consideration for auto aid does come from the $700 bil. I agree Paulson should go. It's time the Wall Streeters left the stage. We need some management oversight running the show, not banking and investment interests.

[WestCoastBuckeye]

"Partisan gridlock." 95 filibusters ... and COUNTING.

While I'm skeptical of ANY deal with our auto industry (we're so far behind Japan, it's just frightening), I'm especially miffed that, if we're gonna do it, we have to fight to do it with the $700 billion that we've already approved ... the $700 billion that nobody seems to be in charge of.

Obama, could you start early? Please? We'll pay OT.

[chewie2008]

Get some German Whiz Kids over to the States.It`s time for German Engineering.Ladies and Gentlemen....The World`s Most Fuel Efficent Car:

http://gas2.org/2008/03/12/the-worlds-most-fuel-efficient-car-285-mpg-not-a-hybrid/

[metalpipe]

Something a little more realistic.

http://www.aptera.com/details.php

[boing007]

chewie2008

Get some German Whiz Kids over to the States.It`s time for German Engineering.Ladies and Gentlemen....The World`s Most Fuel Efficent Car:

http://gas2.org/2008/03/12/the-worlds-most-fuel-efficient-car-285-mpg-not-a-hybrid/

Wicked looking car. Like it a lot.

[ErnestineBass]

Carbon fiber...YES!!!

Stamped steel is so...20th century.

[SchmaltzyTheGolem]

My back is getting waterlogged from all the rain pouring onto it.