by Frank James
It looks like the nation may be very close to running an experiment to find out what happens when it loses one or more of its legacy automakers during the worst economic downturn since the Great Depression.
All indications are that the $14 billion rescue package drafted by the White House and congressional Democrats to save the Detroit 3 automakers will not have enough votes in the Senate since even some Democrats appear unwilling to vote for the legislation that has emerged.
And this is despite General Motors' warnings that it will burn through the last of its cash by the end of the month at which point it will be forced to file for Chapter 11 bankruptcy protection.
For the bill to have a chance at passage, it would likely need Sen. Mitch McConnell, the Senate Minority Leader, to support it or at least not to vociferously oppose it.
But he is very much opposed and has loudly stated his reasons on the Senate floor earlier today.
"Some argue that the effects of an auto industry collapse would be too acute and far-reaching for an already-struggling economy to bear. This is impossible to know. And even if we grant that these companies would fail without taxpayer help, we would still have to ask ourselves whether the proposal before us achieves the goal that everyone claims to embrace -- namely, the long-term viability of ailing car companies -- and, in my view, it does not.
McConnell said he supports an amendment by Sen. Bob Corker, a Tennessee Republican that would force the auto companies to make needed changes more quickly, thereby increasing their chances for survival.
Corker detailed his amendment on the Senate floor as well as in an opinion piece in the Detroit News.
An excerpt from his opinion piece:
The last thing Washington should be getting involved in are issues like product development and shedding excess capacity -- that should be left up to the boards of these companies. Our role should be swift and simple and centered around two areas where we can force immediate and transformative change: addressing the unworkable capital and labor structures that cripple these companies. I cannot support the proposed loan package as written by Democrat lawmakers and the White House because it doesn't tackle these critical issues.
To that end, I have put forth several measures that need to occur for any government-backed loan to be successful:
• One, give existing bondholders 30 cents on the dollar to help reduce their overall debt load.
• Two, bring wages immediately in line with companies like Nissan and Volkswagen.
• Three, GM owes $23 billion to the United Auto Workers' VEBA (voluntary employees' beneficiary association) account. The union must agree to take half of that payment in GM stock.
• Four, the union must agree to do away with payments to workers who are still receiving almost full compensation up to four years after their jobs ended.
The Detroit News also has a good story on the role Corker has played in the Senate in recent weeks. He has become one of the Senate's leading skeptics on the bailout as structured and has offered an alternative plan that obviously has gained traction with some of his fellow lawmakers.
There may be a Senate vote still today on the legislation including possibly Corker's amendment which, not inconsequentially, is opposed by many a Democrat because it would force some huge concessions from the United Auto Workers.
Also, some lawmakers, including Democrats, oppose some of what's been added on to the legislation.
As the Associated Press reports:
Democratic Sen. Claire McCaskill of Missouri, who represents an automobile manufacturing state, announced she would oppose it because of an unrelated provision giving federal judges a pay raise...
Democratic Sen. Max Baucus is opposing it because of a provision to bail out transit agencies that were involved in transactions now considered unlawful tax shelters.
McCaskill said judges' pay raise, inserted by Reid, "sends the wrong message to the United States of America at this scary moment."
So it's not looking good for the U.S. auto industry.
Comments
Total waste of money as long as Detriot is not competive. with import builders on cost.
Posted by: Inky | December 11, 2008 3:20 PM
If the Democrats allow the Republicans to get rid of the unions in the US, they should be held to these actions.
This is nothing less that the Republicans are attempting to do.
Posted by: W OBrien | December 11, 2008 3:23 PM
Then let all those laid off remember (because you know the reality will be subject to reinterpretations at election time), for the record:
Yes, it was a Democratic controlled Congress, but it was the minority Republicans who held it up.
Posted by: Kenny Bunkport ✌ | December 11, 2008 3:26 PM
If the Democrats allow the Republicans to get rid of the unions in the US, they should be held to these actions.
This is nothing less that the Republicans are attempting to do.
Posted by: W OBrien | December 11, 2008 3:23 PM
Get rid of the unions as they aren't what they were in our grranfather's day-
.
Posted by: Inky | December 11, 2008 3:32 PM
Kudos to McCaskill and Corker, whatever reasons they give for opposing this taxpayer sellout.
Posted by: Let Them File! | December 11, 2008 4:02 PM
The GOP has already lost two straight elections. If the auto and manufacturing base fail, not only will it exacerbate the worldwide depression, the GOP will make themselves irrelevent for decades to come. While that is a welcome result, the devastation their failed economic policies would sow is not worth the electoral success in my opinion.
Posted by: Loyd Beard | December 11, 2008 4:09 PM
O'Brien,
So it's the Republicans getting rid of the unions. Just want to be clear...
Posted by: Kenny Bunkport ✌ | December 11, 2008 4:12 PM
Get rid of the unions as they aren't what they were in our grranfather's day-
Posted by: Inky | December 11, 2008 3:32 PM
....and here I had always thought the GOPer's were against hiring illegal immigrants for cheap labor.....
It seems the GOP can't help but to repeatedly shoot itsself in the foot these days.
Posted by: mr happy | December 11, 2008 4:17 PM
I am sympathetic to those who don't want public money spend on private enterprise, or who don't trust the management of the Big 3, or who think that the Big 3 are doomed anyway, or who think that the bureaucracy of the UAW is top-heavy and wasteful. To various degrees and with varied levels of enthusiasm, I accept all of these critiques.
And yet, our decision now is not to get rid of the Big 3 or their leadership. They will head to bankruptcy, under current management, if no bailout is forthcoming.
It is not about whether to save public money (more of which will go into cleaning up the consequences of an auto industry failure than would be spent now.)
It is about one concern only: the destruction of the UAW and as much of the American labor movement as the Republicans can manage in these last few weeks before their power is sapped.
Unionism is seen by conservativees as unnecessary, socialistic, out of touch, out of date -- everything that has been said about unions since they first ever came into being. These arguments are part and parcel with non-enforcement of working conditions laws and elimination of the minimum wage: they think that America would be better off if our workers were as desperate and meek as those of China.
Much as when Ronald Reagan dismantled the original PATCO, the union of air traffic controllers, the hope of Senate Republicans is that a victory here will send a chill through the labor movement generally. "If it can happen to a venerable union like the UAW," people will say, "who can't it happen to?" It is also a move to make union workers feel that they have to strike and thus place the future blame for economic trouble not on the foreheads of Republican bosses, but of Democratic workers.
Posted by: Senaca Doanne | December 11, 2008 4:44 PM
Sens. McCaskill and Baucus are spot on.
Why can't Congress consider and vote on a narrowly focused bill without all this junk clinging to it like barnacles on a whale?
Posted by: DaveB | December 11, 2008 4:45 PM
Congressman Dennis Kucinich (D-OH), who has been a vocal proponent for aid for domestic automakers, today made the following speech during debate on H.R. 7321, the Auto Industry Financing and Restructuring Act:
“I rise in support of the rule and the underlying bill. The underlying proposition is this: Should the United States have an auto manufacturing industry? That is really what we’re deciding here. Because if this rule and/or bill goes down, we are faced with an untenable condition which will lead to the collapse of our automotive making capacity and, according to some economic policy analysts, the elimination of over 3.3 million jobs across the economy; jobs that are affected directly and indirectly by the automotive industry.
“I think it is important to step back and look at the context of this. Are we intending to stay a great nation, a world power, or are suddenly we retreating from the world stage? Because an America without an automobile industry is also going to be an America without a steel industry. We are already seeing our aerospace and our shipping industry affected.
“It is time for us to have a national economic policy, which says that the maintenance of automotive, aerospace, steel and shipping is vital to our national security. Not just our economy, but our security. Sixty-seven years ago, when the U.S. was attacked it was those industries which enabled us to be able to defend ourselves. Now I am a person who stands for peace, but I also believe in preparedness. To me it is unthinkable that the U.S., which was able to mobilize its productive capacity, would suddenly throw it away.
“We have to remember that our ability to make things is vital to being a great nation, and we have to remember that this is a moment that we should be able to rise to this occasion. It is a tragedy that we have to debate something that is a proposition about whether or not we remain a strong nation. You know we’re actually talking only about 2% of the amount of money that was given for the Wall Street bailout, which I spoke against and voted against. This is an altogether different proposition. We cannot totally reject industrial capitalism and remain a great nation. There are a lot of questions about finance capitalism which the $700 billion bailout brought out, but we have to have the ability to make things. And we can’t ask the autoworkers to work for nothing.
“We have to have the ability to make things. We also have to have the ability to see automotive in the scheme of a broader industrial policy. Let’s remember who we are as a nation. With all of our troubles, trials and tribulations, this is still the greatest nation in the world. What keeps us there? Our ability to make things. To make cars, to make steel, to make planes, to create ships- that’s what help makes America great. Let’s not give that up. Let’s not let this moment pass and decide this is just a trivial matter of just $14-15 billion. This is a question of who we are as a nation. Let’s be strong. Let’s vote for this bill.”
Posted by: anonamonster | December 11, 2008 5:05 PM
Well, when the capitalists on Wall Street need a bailout, it's delivered smart time/post haste!
But when a 'Main St' enterprise needs help it's suddenly all maveriky free market ideology.
The USA will regret it for generations if the B3 go down.
Just think, they actually make something and sell it.
BTW, it's the health care costs that are killing the B3. If we had national health ins. we wouldn't even be here talking about a bailout.
Posted by: C.Morris | December 11, 2008 6:36 PM
So if it doesnt pass the Union is at fault? Millionaire CEO's run companies into the ground and get heavily compensated for it. Corker and anyone else trying to sneak secret adgendas for their cause in this issue should never be elected again. Our taxes get spent unwisely as it is. How about these taxes actually going for the people, by the people. I am a UAW line technician. Unskilled you say....heres my shoes walk a couple miles in them.
Posted by: Gerald E. Lang | December 11, 2008 6:50 PM
You know there's an easy solution to all of this.
If Bush and the Republicans would simply go to Iraq and find the 8 or 9 billion that went missing, the country would have the money to solve this crisis at no cost to the US.
Of course THEY could also have Iraq pay for the reconstruction that THEY said the Iraqis were going to do with the oil money they had.
Posted by: W OBrien | December 11, 2008 9:09 PM
I think the politicians should give there wages and benefits up. After all there the reason the economy is in the tubes. trillions of dollars in the deficit and they have nerve to tell the auto industry anything about there business.
Posted by: nicky reed | December 11, 2008 9:46 PM
MAD--Mutually Assured Destruction, a concept left over from the Cold War, but applicable now. The GOP is bent on destruction of the middle class and the good paying jobs that go with it. If you don't believe it, look at the $700B bailout and the conditions foisted upon Wall St. There were none. OK, so we exterminate the industrial base, wipe out those jobs (at least 3M by most accounts). After we recover from the resulting next Great Depression (experts believe this could take 10 years to sort out),the Republican Party will be the Leper Colony of the 21st Century. Is it a fair tradeoff? Destruction of the American Dream vs. the elimination of the Republican Party. Hmmmm....not sure, but it's awful tempting.
Posted by: Stevo | December 11, 2008 10:28 PM
The Ivory Tower bastions of Detroit have been rotting to the core for years. The demise of this obviously self-serving bunch is long overdue. There no lasting place in the harsh land of economics for anything like Detroit, and even the simplest lessons of Econ-101 tells us that failure will always occur. Why would anyone 'pay' to prolong it.
BTW, what exactly is and ‘American’ car?? Toyota motors is operating in the US, employing many Americans, in at least TX, CA, IN, TN, VA, MI, MS, KY, AL. Honda is 'same' in OH, AL, CA, CO, MI, TX, SC. Need I
go on here?
I'm also told that GM is bigger internationally than domestically.
I think I see some smoke & mirrors...
Posted by: yogi schaffner | December 11, 2008 10:58 PM
FORD, GM AND CHRYSLER WOULD RATHER GO BANKRUPT THAN PRODUCE FUEL-EFFICIENT CARS!
Read the articles below to understand this strange fact. Foreign car makers are making record profits on fuel-efficient vehicles!!
The Big 3 (small three?) are busy paying out **MILLIONS** to lobbyists having them lobby Washington to push for **LESS** fuel-efficient vehicles. The "small three" are also suing California and other states that are asking that they produce more fuel-efficient vehicles.
Meanwhile, the American consumers are voting with their pocketbooks. The American consumer wants to pay **LESS** for gas during these tough economic times.
Therefore, the Asian auto makers are making **RECORD PROFITS** because they are providing fuel-efficient vehicles to consumers who desperately want fuel-efficiency and cannot get it from FORD, GM or CHRYSLER.
The "small three" continue to argue about whether "fuel-efficiency" should be 27 or 30 MPG. Meanwhile, the Asian auto makers are developing new lines of cars that will obtain between 60 and 80 MPG and drive Ford, GM and Chrysler bankrupt one more time!!
Article 2:
Honda's second-quarter profit rose 63% while Hyundai's climbed 45%
Published: October 26, 2007
http://www.iht.com/articles/2007/10/25/business/sxcar.php
"Honda's fuel-efficient Civic compact cars and Accord sedans helped it win customers from General Motors and Ford Motor in the United States, where it earns about 70 percent of operating profit."
Article 2:
Honda's year-end cycle sales up 13.9%
http://www.highbeam.com/doc/1G1-132936073.html
"Honda's fourth quarter revenue was JPY 2.349.5 billion ($21.879 billion), up 9.5% compared to last year's fourth quarter..."
---
Oh well, I guess FORD, GM or CHRYSLER won't be making 5 BILLION this quarter like Honda. But at least they have "stood by their principles" - lower fuel efficiency for American cars.
Posted by: PhairePleigh | December 12, 2008 5:01 AM