Congressional Democrats to Propose New Aid Bill for Detroit Automakers
15 November 2008
Democrats in the US House of Representatives plan to introduce a bill providing immediate, targeted assistance—separate from the $25-billion retooling aid package (earlier post)—to struggling Detroit automakers.
According to House Speaker Nancy Pelosi, the House Democratic bill is intended to provide time to allow the automakers, together with the affected unions, time to develop a plan to assure the long-term viability of the industry.
That plan, Pelosi said, must reflect the following principles:
Restructure the automobile companies to ensure their long-term economic viability;
Meet standards for fuel efficiency that ensure the competitiveness of US autos, including new fuel-efficiency standards;
Deploy advanced vehicle technologies required to compete in the domestic and global market.
The House plan, in seeking to provide the funding via the $700 billion Troubled Assets Relief Program (TARP) recently authorized by Congress, contrasts sharply with the White House proposal to repurpose the $25-billion retooling package to provide immediate financial assistance.
The appropriate source of funding for this short-term assistance is the Troubled Assets Relief Program (TARP) recently authorized by Congress. The Democratic plan includes even stronger limits on executive compensation and assurances to protect the taxpayer.
Any effort to divert funds from the advanced technology initiative contained in section 136 of last year’s energy bill is a step backward in assuring the viability and competitiveness of the US auto industry.
—Speaker Pelosi
Our last stimulus package cost 168 BILLION. The money was borrowed from China! It didn't do a thing to improve our economy. We have bailed out and bailed out. Still our economy is going down the tubes at a rapid pace. Not enough credit is being given to the role the record breaking cost of gas played in the downward spiral of our economy and the demise of businesses from the largest corporations on down the line. Families and business have struggled this past year to get buy while being slammed with high fuel costs. The average family broke the budget filling up the car alone. Then to add insult to injury, every consumer product cost us more due to increased production and shipping costs. Food, clothing, everything imaginable now cost more as well. Electric companies were quick to raise prices some as high as 22%. So, we cut back, drive only when we absolutely have to , quit going out to eat. Stop buying new clothes. Sadly the ripple effect is never ending, this results in even more jobs being lost. OPEC responds to our lowered consumption by cutting production and they continue to cut and will do so until they get the price per barrel back up. We need to end our dependence on foreign oil. We have so much available to us in the way of FREE energy sources such as wind and solar. We have modern technologies such as hybrid and electric plug in cars. Why don't we invest in America becoming energy independent. 168 billion would go a LONG way towards getting some of these things set up. We are using oil at the rate of 2x faster than new oil is being discovered. World demand is rising as 3rd world countries become more modernized and populations explode. Jeff Wilson has a new book out called The Manhattan Project of 2009 Energy Independence NOW. President elect Obama needs to read this book and provide every elected official one. We can't continue to bury our heads in the sand. We have the knowledge, we have the technology, what we seem to lack as a nation is a plan. www.themanhattanprojectof2009.com
Posted by: | 15 November 2008 at 07:04 PM
Instead of offering $25 billion to the big three, offer it to other companies in the form of low interest, long maturity government loans with a contingency that the companies locate in the operating area of the Big 3. Companies would include:
1. A123: Batteries
2. Toshiba: Batteries
3. GE: Electric Motors
4. Siemens: Electric Motors
5. Ricardo: Advanced gasoline engines
6. Mahle: Advanced gasoline engines
7. Toray: Carbon fiber chasis
8. SGL Group: Carbon fiber chasis
9. Eaton Corporation: hydraulic hybrid drives
10. Bombardier: Light Rail
11. Tesla Motors: Electric Vehicles
12. Aptera Motors: Electric and PHEV Vehicles
This would be rewarding well run companies that have a future while punishing poorly run companies (Big 3) that have no future. $50 Billion wouldn't be the end of it, trust me.
If the above companies were LITERALLY HANDED MONEY TO BUILD NEW FACILITIES and had to do so in the area of existing Big 3 facilities, do you really think that they would pass up the opportunity? Do you think that people fired from Big 3 plants would remain unemployed? If so, where would these (above) companies get their employees since they are being forced to locate in a specific area?
Posted by: GreenPlease | 15 November 2008 at 07:19 PM
You made a point, American have to cut on everything simply they have been living beyong their mean for years, credit card and 3rd morgage, the all thing with money bored to china. A growh based on debt is not sustainable, the game is over, america is rich...of a huge debt that is going crazy to finance 2 wars and an unprecendented bail out. Now to get rid og foreign oil addiction you have to developp alternative that are even more costly than oil based solution to start with. Problem where do you take the money to do that ? it is going to be bloody, beleive me the economy will keep down spiraling, unemployement will soar to 10% 2 years from now, and it will take a decade to recover, because this time, contrary to the earaly 80s you won't have the flee in the debt to finance the debt. The game is over, american are done ith speculation they have to return to real work to produce real goods that they can sell to refinance their broken economy, it won't happen overnight...good luck to all of yours
Posted by: Treehugger | 15 November 2008 at 07:25 PM
The BIG 3 are paying over $30/hour to UAW workers in Detroit,compared to less $20 in TX and AL. How could this is be economic viable. We should let the BIG 3 close and give birth to new auto industry. Why majority of tax payers that do not have pension scheme and health benefit after retiring, should bail out the BIG 3 which then pass over to the union workers.
Posted by: Non-UAW | 15 November 2008 at 07:52 PM
Speaker Pelosi is absolutely right and both help and leadership for the US auto industry is urgently needed. Gas is back under $2.00 a gallon, perhaps it is our reward from OPEC & the oil companies for voting for President-elect Obama? GM, Ford and Chrysler's sales will be picking up soon because gas is cheap again, but it will take awhile. However, it will not last as long as the manufactured 'gas crisis' did. That crazy, politically inspired gasoline spike will only do permanent damage to our economy if we mismanage this crisis. American stock will rocket right back up there. This is really what we elected George W. Bush for, he's got a Harvard MBA, so somebody have a little confidence, OK? OK, well, Obama will arrive soon enough and THEN everything will be OK.
America is not headed into some abyss, despite the ignorant socialist naysayers on TV. GM is changing. Soon enough all will be well, whether you buy here at the bottom or not.
Posted by: Ross Nicholson | 15 November 2008 at 11:48 PM
There is only one way out for the Big Three, and indeed for all of the US, and global, slump.
The only way out...is up!
We as a species must begin to utilize three dimensions instead of two.
Not with funky airplanes and helicopters.
Saucers.
It's time to bring 'em out.
C'mon...every one knows there have been saucers in development for 50 years, and even before to Tesla's time.
Now is the time to introduce this technology to the masses.
Tires and tailpipes are so...old-fashioned !
We now have the means to control it, with GPS, computer controls and security.
The big three have the means to produce it.
Let's get on with it.
While we still can.
Posted by: rick Crammond | 16 November 2008 at 01:09 AM
The main reason (there are many others) why Big3 are at the brink of bankruptcy is huge legacy financial burden. Big3 pays pensions (from mostly underfunded funds) and health care costs for about 400 000 retirees. For GM such cost was calculated to be in excess of 1000 dollars per vehicle, and now when their sales shrink it is probably close to 2000. Japanese, Korean, and European car factories built in US are less than 15 years old, and do not have such financial burden. Moreover, these factories are almost exclusively built in “right to work states”, and do not have grip of UAW on their throats.
Airlines routinely undergo chapter 11 bankruptcies to get rid of most part of their obligations for retired pilots and mechanics, with price tub picked up by US taxpayers via PBGC. For automotive company such way is too risky – no one will buy car from bankrupt company. Warranty, resale value, and alike concerns.
Any bail out for Big3 has zero chances to succeed unless US government will take this burden off Big3 shoulders.
So, expect Feds will take big chunk of shares of Big3 as a payment to take legacy retirement obligations (with a promise to sell these non-voting shares in open market when and if (and it is bif IF) they will become profitable again), and provide low-interest cash infusions to jump-start the industry. Most experts agree that Ford has best chances to successful re-organization and modernization (due to better cash position and quite high initial quality of their cars), and Chrysler the worst.
One could ask if US taxpayers are destined to have such bail outs every 15 years. The answer is NO. In September of 2007 GM transferred to UAW 35 billion dollars to finance fund which will cover health care costs of CURRENT and FUTURE employees. Burden of FORMER employees still remains at GM hands.
Posted by: Andrey Levin | 16 November 2008 at 02:17 AM
UAW is the problem.
Posted by: swisch | 16 November 2008 at 05:30 AM
I find it a bit sickening when I hear things like what Andrey Levin said, "to get rid of most part of their obligations for retired pilots and mechanics".
I understand the realities of business, and the need to be competitive today. But statements like that tell me as an employee to never trust any commitments made by a company, even though they ask me to make personal commitments to meet project costs and schedules.
To protect ourselves, we build 401(k)s, and then our financial institutions go belly up and take our savings.
This is nasty.
Posted by: Giant | 16 November 2008 at 07:46 AM
No coincidence that Ford - the only company not requiring an executive enema - is also the only one not needing a bailout.
GM's board of directors gave Rick Wagoner a unanimous vote of confidence a few months ago, after stock values dropped like 80% during his tenure, so incompetence is pervasive at the highest levels there. GM should be reduced down to Chevrolet/[Buick or Saturn]/Cadillac.
The continuous lack of vision and critical analysis of their own assumptions continues to handicap the company at every turn. It was only a question of when, not if, a big auto sales downturn would come along that would accelerate GM's cash burn rate to dangerous levels.
Posted by: DC | 16 November 2008 at 08:08 AM
The Big-3 (management + UAW + employees) failed to remain competitive and they should face one of the most basic realities of business - adapt or go bankrupt. You can't fool all the people all the time.
The signals have been around for many months (if not years) and they have definately not adapted - the time has come for the second solution - to go bankrupt.
Bail outs will never be large enough to change the Big-3 and UAW's long time acquired culture and poor workmanship. Those people cannot be relied upon to build high quality affordable electrified vehicles or future high performance batteries.
There are over one dozen better managed and staffed vehicle manufacturers ready to replace the Big-3, on very short notice, without any financial support with our tax dollars. On the contrary, ounce the Big-3 is out of the way, the others will prosper and may recuperate some of the best elements now unemployed.
Government funds should be used to accellerate the transition from ICE vehicles to electrified vehicles + ESSUs, not to extend the life of ineffective Big-3s and their spoiled pampered overpaid employees.
Will the politicians see the best way out? It is not so sure they will.
How many more $ trillions can the USA federal + states adminstrations can squander before the whole country goes bankrupt?
USA cannot drill its way out of the Oil-energy crisis and should not try to bail out badly managed manufacturers with borrowed funds. A cultural change may be required to readjust many basic values that unrestricted credit and predatory speculations have abrogated.
Change is in the air.
Posted by: HarveyD | 16 November 2008 at 08:44 AM
Mister Lievien
You missed the point (again), big 3 are in trouble because they had a bussiness model that was not sustainable, period!
Focusing on selling trucks to mister everybody (who doesn't need it) for commuting and shopping around is not only environmentally unethical, it is simply an aberration since it pushes the country into a spiraling oil addiction that is just a national suicide. The big 3 put themselves in this situation by dropping not only small cars product but also medium size cars, then puting themselves in a dangerous exposure to any oil price increase. When the oil price started to increase in 2004, instead of curbing their stupid strategy, they went to the white house for more ethanol subsidies, and they spent their time and money in fighting the attempt of the federal government and California to reduce our oil addiction and green house emmission by promoting more agressive CAFE standard. Ok the burden of the union and pension, sure it is a problem, but this problem would have been solved a long time ago (in the early eighties) if we had let the market do its job at the time...
Mister Ross Nicholson,
The gazoline price is down because the demand is down, the world oil production is now in a plateau for more than 4 years when the demand from emerging countries is growing. If the demand goes up again I bet you my 2 cents that the oil price will skyrocket overnight again. The only solution is to make more efficient vehicles. We can count on a oil at 200$/barrel by 2020 so mileage of cars has to be in the 60MPG if you want to keep driving as much as today without killing yourself in gaz cost (do we need to keep driving as muche by the way ?)
Posted by: Treehugger | 16 November 2008 at 09:15 AM
I got a better idea: give $25Billion to Silicon Valley venture capitalists.
Posted by: DS | 16 November 2008 at 01:30 PM
DS:
Here is another idea.
Only give/loan $$B to competitively produce efficient products that would help the country to pull out of the current financial turmoil. That could reduce subsidies by up to 90% and even more.
Of course the Big-3 would not qualify for more than 0.001% of what they are asking for to correct their multiple mistakes.
However, those who can quickly mass produce affordable high quality ESSUs, 60+ mpg hybrids, 100+ mpg PHEVs and BEVs, non-food biofuels, clean electricity etc could be financially supported.
Subsidizing non-productive jobs and the production of inefficient commodities should be given a much lower priority.
Posted by: HarveyD | 16 November 2008 at 02:38 PM
Some of this money is being directed to the "Roof Abatement Program" and attempt to educate architects on aesthetic building skills. As well spent as on low cost nations air pollution.
Posted by: | 16 November 2008 at 06:03 PM
Treehugger:
Big3, as any capitalist enterprise, have one aim: provide short- and medium- time profits to their owners. High legacy costs effectively forced them out of highly competitive and low profit margin market of regular cars into high profit margin temporary niche market of pick-ups and SUVs. One could brag all day long why it happened, but the real question is how to deal with the current crisis NOW.
Giant:
Life is not just. Say, you are lucky to live in rich country (and the rest ¾ of the world population are not so lucky), have a job, and healthy and well-being enough to worry about your post-65 years life. As I said, life is not just. You better thank G..d for it.
Posted by: Andrey levin | 17 November 2008 at 01:14 AM
The UAW has given historic breaks to the Big 3 in their last negotiations. For instance new hires will only earn half the wages of current union members. Also in 2010 health care for retirees will no longer be a company obligation but will paid for by a UAW controlled trust fund. If we can get through the next two years the legacy costs and wages will drop significantly.
Posted by: tom deplume | 17 November 2008 at 11:46 AM
OK, say the Democratic Congress approves a bill. What
are they asking in return? That's our money they are
redistributing to save jobs that pay much more than mine.
I want to see what Detroit and the UAW are willing to give up in order to use my money. I also want to see
a new plan, a new restructuring. But the congessional
leaders, so far, have asked for no concessions from the other side. They have the bargaining chips, the leverage.
They should apply them.
Posted by: swen | 17 November 2008 at 12:30 PM