Auto Industry Execs Hammered By Congress, Bailout Looking Increasingly Unlikely

New York Times:

The heads of the Big Three automakers of Detroit pleaded on Tuesday for emergency government aid to stave off potential collapse, but after four hours of testimony, it appeared they had not persuaded enough lawmakers to move quickly on a bailout.

Senate Democratic leaders said they had not been able to muster the support for legislation that would provide $25 billion to the troubled auto industry from the Treasury Department's $700 billion economic rescue fund.

Read the whole story: New York Times

Comments

[autobailout]

As a lifelong democrat, I am appalled by my elected reps trying to get these bailouts through. The banks didn't deserve it and the auto industry absolutely doesn't deserve it. Everyone is hurting. I am a small business owner on the UWS of Manhattan and I am eating egg salad from a plastic container every day. These auto workers make $56 an hour and their cost of living is low. It's like making $200 on one of the coasts. Our lawmakers need to start thinking of the people who elect them, not special interests.

Protest the bailout at http://www.autoindustrybailout.com/petition/

Enough with the handouts unless you're going to give them to everyone and not just select groups of people.

[JeanPaulSatire]

Earlier today I posted this:

"If I were a senator on the Banking Committee and had the opportunity to question the CEOs, this would be how I would begin my questioning:

'When you flew from Detroit to Washington to attend this hearing was it on a scheduled flight of a commercial airline? If it wasn't a commercial flight, whose jet was it and how much will it cost your company? If it was a commercial flight, which airline was it and what class of seating were you in?'
Reply Favorite Flag as abusive Posted 09:04 AM on 11/19/2008"

And later in the day the answer came: http://abcnews.go.com/Blotter/WallStreet/story?id=6285739&page=1

Their arrogance is astounding.

[TonyOnly]

So we agreed to a 700 billion dollar bailout of the financial sector that caused the meltdown, which they're hording and pocketing, and we're going to deny a 25 billion dollar loan to the auto industry, which they only have to ask for because the financial sector is taking too long to OK the credit they need to keep operating. Let's be clear on the consequences. If the American Auto Industry shuts down, there will be more than 4 million directly related middle class jobs lost. That's before the trickle down effect that kind that kind of damage to the economy will cause. And that's not counting the tens of thousands of midlle class manufacturing sector jobs corporate executives have already exported overseas in the name of corporate profits. If we lose the middle class and are left with 20% of the population living in luxury while the other 80% lives in poverty, civil unrest will be inevitable.

[onalimb]

Why do they have to shut down? Can't they still operate if they declare bankruptcy?

[TonyOnly]

Bankruptcy allows them to back off on their bills, but without operating capital they'll be forced to shut down.

[MsMargaret]

You can then expect automotive suppliers to file backruptcy after them, too. The Big 3 has renogiated supplier contracts down to the bone already.

[KillTheMessenger]

An automobile worker is not middle class and never was. Never will be either. Middle class people take care of themselves, autoworkers are solely dependent on a few large companies to employ them.

[TonyOnly]

With their benefits, Chrysler assembly line workers make $76./hr. That's more than $60,000. per year which easily qualifies them as middle class. Ford & GM are roughly the the same. I'm not saying restructuring isn't needed. I'm saying we need to repair it, not scrap it.

[KillTheMessenger]

You should be posting at

www.FearMongers.com

I, for one, sent email to my representatives asking NOT to bail out the US manufacturers and to let the market take care of it. Toyota and Honda will be happy to pick up the pieces.

[TonyOnly]

And the Japanese will laugh all the way to the bank while America continues it's descent into poverrty. The terrorists couldn't have planned it better themselves.

[Infiniti]

Here's an idea. Why doesn't the government compromise.

Let's give the Big3 half of what they are asking for. Since any good executive worth his salt is asking for at least double what they need, giving them half is really what they want. This money will be distributed only once to help them through 2009.

In exchange, they will accept Chapter11 reorganization. Most of the sins of their past (low Café standards, high labor, pension and health care costs, idle workers being paid 95% of salary, exorbitant execute salaries and bonuses, closing unprofitable dealerships) can be rectified and most contracts can be renegotiated.

Being leaner/meaner will help insure their survival to be more competitive with their foreign transplants. Obviously, it will take time to renegotiate these contracts and completely clean house. What better time to implement a bold new strategy than when you are burning through money with no options left. This bridge loan will hold them over until the new terms are signed and the new strategies are put into place.

The government wins because they aren’t simply dumping money into a black hole. They also limit the rhetoric that they aren’t providing any assistance and accelerating the demise of major manufacturing and 2-3 million workers. The Big3 have a perfect out to stamp out legacy contracts which give their rivals a significant cost advantage. To be competitive in a global economy, you have to do what right for the viability of the company and its shareholders.

[KillTheMessenger]

They way to economic hell is paved with compromises, they say.

:-)

[darthdarcy]

Running on Empty great tune, it's in Drop D tuning you know...Dav­e Lindley on lap steel...!

[JoeBlough]

They shouldn’t be begging. They should be using their astute, superior business knowledge to correct their failures. If they need the government, they should be fired and go into bankruptcy.

[KillTheMessenger]

They aren't begging. They are simply saying

"We are too big to fail! Put the money in this bag."

[onalimb]

Unfortunately the only astute, superior business knowledge in this group is used to increase their own personal pockets.

[MsMargaret]

Wall Street CEO's had the President, the Federal Reserve Board Chairman, and the Secretary of the Treasury do their begging for them.

[onalimb]

Let the big 3 dissolve and form 1 good company that produces high quality, affordable, fuel-efficient alternative energy vehicles. Put USA auto industry at the cutting edge again, create more jobs, get in step with the whole change mantra, and export to other countries. This whole thing could be a positive opportunity.

[MsMargaret]

You do realize that initial talks with Paulson concerned the GM buyout of Chrysler? Bush put an end to that.

[onalimb]

Yes, but I do not think one failed company should buy out another. They all need to dissolve and reform.

[feo]

This country subsidizes agriculture, subsidizes mining, subsidizes oil but when the auto industry asks for a few bucks to get it through trying times, the answer is "Tough luck, Detroit." Well, I want my money back, money given to big agriculture, big mining and big oil over the last 80 years! Screw the subsidies to corn growers to turn their products into E85, screw the "oil depeletion allowances" oil producers received for 50 years, screw John Kyl's mining buddies. Michigan wants its money back. Now!

[TheJibreelaMonsters]

Michigan: See Gov Granholm

[HighPlainsJoker]

Poor you. Auto industry has been getting a break on emission standards and gas milieage for years, and that is their problem. Think before you caste stones, Even if I happen to agree with your point, which I do, there is too much socialism for big industries, lets cut it out for all of them. What's your personal interest in the auto industry? A brother or uncle work there? The have failed, let them suffer the consequences. Every average American has seen this coming since 1974. The CEOs are just plain greedy.

[TheJibreelaMonsters]

Ah the Carter Years are back

[KillTheMessenger]

You wish. If they were, we would be raising efficiency standards and taxing gasoline higher. We would have a 55mph speed limit and a luxury tax on SUVs. What we are seeing now is pussyfooting around the painfully obvious but obviously painful.

[wendynyc]

We need a Lee Iacocca at this time - not these three goons!

Flying in private jets - wow - isn't that the ultimate!

[KillTheMessenger]

Lee was against safety before he was for it.
Lee was against fuel efficiency before he was for it.
The only thing Lee is constantly in favor of is Lee.

He is no different than the three stooges above.

[PhilipTaylor]

Goldman Sacks and Morgan Stanley are giving out $13 Billion in BONUSES this year!
Instead why don't we take that back from them and give it to the AUTO COMPANIES!

[TheJibreelaMonsters]

because I worked hard for that bonus, gotta pay off my Harvard Student Loan

[PhilipTaylor]

Worst Economy since the Depression so make payments like the rest of America has to!

[MsMargaret]

Congress is having a difficult time facing the failure of their $750 billion bailout to stop the downward economic spiral. Paulson didn't buy up the toxic bank debt, he refuses to apologize for that, and he has no new plan for the implementation of the remaining funds. Heck, if he doesn't know what to do, what's Congress left to do but blame the auto companies for their own failures while desperately avoiding talk of credit markets which are as frozen as ever.

[redlinemetro]

This bailout is a joke on so many levels. It has yet to take its true form and already changes are being made and whoever hasn't cooked their books has one hand out palm extended and the other hand grabbing a parachute. No one throws good money at bad debts and supports mismanagement. Oh wait, the US does.

[JaneQCitizen]

In addition, under current economic conditions - the money will only last until March 2009 and they'll be back with their hands out again.

Citizens aren't going to start buying cars until our economy and our INCOMES improve.

[baghdadjoe]

If you look at it, the biggest problem for the "Big 3" is that Americans do not want to buy American cars.

American cars are crap, they are a rip-off. The "Big 3" has hugely lost market share, and it's not coming back. This means that there will be no sales - and no revenue - in the future for the US automakers.

[HighPlainsJoker]

You are right on all counts but one. Americans will buy American cars first, when carmakers provide quality. I own a 2002 German Audi, and a 2001 Ford Mustang. Just close the doors on each a couple of times and you get the idea. Braking?? Steering??
No comparison. And the Audi does better mileage. (I bought them both used, but from known first owners). Make me a solid car with good mileage and I will buy American.

[Lexica]

“Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact that they are seeking treatment for wounds that are to a large extent self-inflicted,” he said. “No one can say they didn’t see this coming.” (Senator Christopher Dodd)

For at least thirty years the American auto industry has been asked to redesign cars to be lighter, get better gas milage (and/or use alternative sources of energy), and cost less. Foreign manufacturers have accomplished all three objectives, which is why they are thriving. Detroit decided they didn't want to waste money on research and retooling factories when they could pocket profits instead. I read that the executives who showed up in Washington DC arrived by private jet(s). That alone makes a statement that they're not interested in making changes, and they're definitely not interested in losing any of their benefits. I don't know how - or if - this can be resolved, but this situation should be a cautionary tale about what happens when greed trumps all.

[onalimb]

Amen

[baghdadjoe]

Lexica - thank you for this post. It clearly summarizes exactly why the "Big 3" have failed.

It's too late. They had their chance, but their greed has doomed them.