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Congress to Autos: Here Are Terms For Your Loan

As promised earlier today, House Speaker Nancy Pelosi (D-Calif.) and Senate Leader Harry Reid (D-Nev.) sent a letter to the heads of GM, Ford and Chrysler this afternoon spelling out the terms that the troubled automakers must meet before Congress will consider a multi-billion-dollar, quick-cash loan to help them stay in business.

Congressional leaders gave automakers a list of promises that must be made in writing by Dec. 2 so Congress can come back for a second lame-duck session on Dec. 8 to consider the loans.

Here is what Congress needs from Detroit before it will release any loans:

-- A "forthright, documented assessment" of the Big Three's cash position, short-term liquidity needs and plans to meet their financing needs.

-- Estimates of how much money Detroit needs based on auto sales at current, better and worse levels.

-- "Transparency and accountability," including balance-sheet reporting to the government.

-- A promise to pay the government loans back before loans the Big Three has secured from private lenders.

-- The provision of sweeteners to taxpayers in the form of warrants or other mechanisms.

-- A promise to bar the payment of dividends to shareholders and "excessive compensation, including bonuses and golden parachutes." (Note the lack of a concrete figures on bonus and salary limits; this will provide automakers with some wiggle room to retain key executives.)

-- Proposals to continue paying health care and pension obligations.

-- A demonstration that the Big Three will be able to hit fuel-efficiency standards set for by Congress last year and "and become a long-term global leader in the production of energy-efficient advanced technology vehicles." (Again, wiggle room.)

-- An agreement that the government loans will be immediately callable if Congress's requirements are not met.

In the P.S. part of the letter, there's this phrase, which is doubtless aimed at the Corporate Jet Image Problem: "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."

In the introduction of the letter, lawmakers wrote: "We recognize the importance of the domestic automobile industry and are committed to working with you to ensure its viability in the years to come."

Also, the Democratic leadership couldn't resist rubbing the lame-duck President's nose in it a little bit: "Unfortunately, the Bush Administration and the Federal Reserve have thus far declined to use their powers to improve our nation's financial stability by assisting the auto industry."

-- Frank Ahrens

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By Frank Ahrens  |  November 21, 2008; 5:32 PM ET
Categories:  The Ticker  | Tags: Detroit bailout, automakers  
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Comments

Note that there is NOTHING about getting labor to amend their contracts that are at the root core of this problem. Instead we get the populist pablum about "excessive executive compensation" -- when it is excessive compensation to the labor force, including the pension and health benefits that the Dems want to be sacrosanct, that is the driving force of the Big Three's problems.

What inane policy makers we have, they don't understand anything about making business work, or how to fix this problem. The auto makers are better off in bankruptcy.

Posted by: RBCrook | November 21, 2008 6:42 PM | Report abuse

No surprises here on where Pelosi's and Reid's bread is buttered. No mention of the UAW renegotiating their contracts, eliminating their "jobs bank" where people get paid to not work, restructuring health care costs or pensions, or loosening union work rules. Since GM, Ford, and Chrysler have an average of $78 per UAW worker costs and non union Toyota, et. al. have an average of $48 per worker cost for their US plant workers, how can there be a reasonable viability plan without the UAW facing reality as well? In addition, it appears that the US taxpayer will be funding the rather generous UAW healthcare and pension plans. As per usual, just another special interest being served, it's just the UAW (big labor) rather than a corporate interest. No surprise that big labor provides huge money and ground soldiers to the likes of Pelosi, Reid, and other Democrats, who, of course, are beholden to that special interest and don't have the courage to tell them to wake up and bring something to the table too.

I say no taxpayer money until the UAW comes to the table as well and provides real concessions on wages, health and pensions. Better to have jobs than no jobs at all. If not, well, then bankruptcy will take care of the same things with great pain to them and the Country, but the rest of the Country will somehow survive.

Posted by: fwillyhess | November 21, 2008 6:49 PM | Report abuse

Where were these terms and conditions when Reid and Pelosi were shoveling taxpayer billions to the Wall Street parasites? You don't suppose these Congressional losers are in possession of their own sinking portfolios, do you? No, of course not. Spare me the BS.

Posted by: pjwertz | November 21, 2008 6:51 PM | Report abuse

I do not believe the automakers will accept
the deal. They have to account for too much.

Posted by: robertkneale | November 21, 2008 7:00 PM | Report abuse

The points made in your article refer to tactics. Where is the strategy? So far, it looks like more of the same.

The Big Three have been doing something that is very wrong: their business models ain't no good. By the way these models came from the Big Boys at the top.

If there is going to be a new direction then it must come from new people. The present managers have not convinced anyone that they have answers.

Downsizing and sell-offs will probably be necessary. These companies may have to shrink or be shrunk.

Let them spell out the changes that that they will have to make in order to succeed.

I suspect that Congress is delaying a partial collapse of Detroit.

Posted by: robertjames1 | November 21, 2008 7:08 PM | Report abuse

Right RBC, but you could just dive in and fix it lickety split. Labor isn't in there because the problem is so big that none of the manufacturers could deliver in time.

Man, haven't we shut your type up for at least a few years already. Your simple mind is as always, shedding light on why we've got this problem in the first place.

Posted by: semantic1 | November 21, 2008 7:18 PM | Report abuse

Of course it is all Labor's fault.
It had nothing to do with the Big Three focusing only on SUV's which were fun when gas was cheap but are completely unsustainable in the long run. Nor did it have anything to do with the fact that, by and large, they make cars (not SUV's) which are really, really, horrible. One would think that free marketeers would realize that market demand would have some role to play in this.
Nope, it's all the union's fault.

Posted by: thebronxduck | November 21, 2008 7:36 PM | Report abuse

Sure, blame the UAW, it's nobody else's fault. It doesn't wash. It was not the UAW's decision to pimp inferior products.

Posted by: szwheelock | November 21, 2008 7:54 PM | Report abuse

fwillyhess: Right on. Nail on the proverbial head.

szwheelock: You are correct, it's not the UAW's fault that American cars are so terrible. The problem is having to pay the same price for an American car for half the quality when I can buy a Japanese car for the same price and know it will run for 10 yrs.

Posted by: hinomura | November 21, 2008 8:15 PM | Report abuse

I still don't see the benefit in propping up a company that has consistently lost market share for over a decade. Will people suddenly rush out now and buy these cars? I think not. Actually, with gas prices as low as they are, perhaps they can clear out their lots of the bloated SUVs. But that's another story.

They so-called Big 3 will make all the promises congress wants to hear. Then, if a few months "Yeah, we did all of that stuff, but, we need more money, So, fork it over, OK? Thanks"

Posted by: tifoso1 | November 21, 2008 8:20 PM | Report abuse

How about...
Thou shalt build affordable quality cars that get 100 mpg and are environmentally clean.

This is just a down payment. The Big Three are not going to be able to change and build quality cars to compete with imports.

They only thing we should bailout is the people who work for the automakers, not the business itself!

Posted by: maphound | November 21, 2008 8:22 PM | Report abuse

The arrogance of these Big Three execs is just astounding! They fly in on private jets to get their handout, and apparently don't even have a business plan to show congress! If they went to a bank, you can bet they'd need a detailed plan! Maybe they are just so used to a Republican congress granting their every wish! But, yeah, lets blame the unions, if they just had "company towns" and slave labor like you read about in the Grapes of Wrath, the Big Three would be a resounding success!

Posted by: squirebass | November 21, 2008 8:24 PM | Report abuse

You fools that bash the american auto... Its as much your fault as any one else's. Your scum. Support your fellow americans. Buy american you bloody traitors... I wish I had a sledge hammer for every vehicle that I see that is not american, I would take all of you out. Every auto I have owned or leased has been american made. And I have never had issues.. Your scum, total scum... You are selling out your friends and neighbors. YOU ARE THE MAIN REASON THIS IS HAPPENING.

If I were to take out my anger on anyone... It would not be the UAW or it's members, nor the CEO's of these companies... No, they made mistakes... But not as big of a mistake as selling out their fellow citizens.

By the way you traitors.. I do not work for the auto industry. Never have, too old to start. I work in IT... I have worked for a state goverment and I now work for a publishing company(phone books). None of them were EVER affiliated with the auto industry. I buy at local buisness's when I can to support the local community. I refuse to buy foreign products when I can make the choice between american and them.

You people are the cause OF ALL THE PROBLEMS. Your buying habbits have caused the loss of jobs in mutiple manufacturing sectors. Clothing, electronics, food produce, energy, and now the auto industry.

Let the blame fall where it belongs. On traitors that will not support the nation they live in.

Dan from ohio.

Posted by: LiberalBasher | November 21, 2008 8:49 PM | Report abuse

First I want to say that I am not in favor of a buy out (nor was I in favor of the buy out for AIG). However, what I cannot stand are these sanctimonous Congressional representatives who have the audacity to dictate to Detroit when WDC has not balanced its checkbook in over 50 years. They spoke to the Big 3 execs like they were dogs or criminals (and they are neither). The Big 3 and their rank and file and employees have paid bookoo taxes over the last 75 years, paid tens of thousands of mortgages and put tens of thousands of kids through college. Who do these congressional ilks think they are?

Who gives a damn if they flew a corporate jet to WDC from Detroit? Executive pay,,,, these congressmen sicken me.

Posted by: WmJLePetomane | November 21, 2008 8:59 PM | Report abuse

I'm going to stay with my gut on this. Let them die! Between the mismanagement issues over the last three decades and the UAW's greedy, short-sightedness for the same period, they deserve NOTHING from us.

As things are, let's focus on fixing the credit crunch. If we do that and they (both of them) haven't figured out how to keep in business, then let a bankruptcy judge or some other company do it for them.

I worked for a major, American owned, company. The first piece of required reading was a Toyota case study. The company I was with is not in the news, because their books are strong and their management focused properly. I'd also like to mention that it was a union shop.

So, don't fall for the BS that both sides are giving here. They've each made their proverbial bed. It's far past time that we let the market take the axe to them.

It might be cold and unpleasant at best; but we need to grow past this. Pittsburgh was a steel town. Steel died. Pittsburgh died along with steel. But, it revitalized itself and it's a far better city now.

Do you doubt the communities that would be hurt by letting any of the Big 3 fall, can revitalize themselves as well?

Why??? Deal with that problem instead of putting our money into failed corporations and over-reaching unions.

Posted by: juggernautenterprises | November 21, 2008 9:23 PM | Report abuse

"Unfortunately, the Bush Administration and the Federal Reserve have thus far declined to use their powers to improve our nation's financial stability by assisting the auto industry."

And what have Reid or Pelosi done? They handed Treasury $600B to give out to banks but have balked at helping to build a product that America depends on, and to sustain jobs that hundreds of thousands depend on.

"The Big 3 and their rank and file and employees have paid bookoo taxes over the last 75 years, paid tens of thousands of mortgages and put tens of thousands of kids through college. Who do these congressional ilks think they are?"

Excellent point WmJLePetomane!

Posted by: rpatoh | November 21, 2008 9:24 PM | Report abuse

In a letter to the Big 3, Pelosi and Reid said the companies should submit a plan to address numerous items, among them, “payment of health care and pension obligations to the union.” Have they written a similar letter to the UAW?

According to DaimlerChrysler news media covering 2007, it pays $20.14 per hour for health care costs, and $26.57 for other benefits, including pensions. Health care benefits include such things as orthodontics and Lasik surgery. Union Workers receive a portion of their pay when laid off, in addition to unemployment compensation.

The average worker makes $29.15 per hour. A sum that seems reasonable.

The UAW spent $11.5 million getting the Dems elected, and, of course, election day is one of the 16 “holidays” union employees get. How do you feel about your tax dollars paying for these “benefits”?

Without pressure from the public, we'll be giving the Big 3 $25 billion in a week or two, and possibly a similar sum again in the spring (this, according to Pelosi).

There may be a need for a bailout, but the Union must make MAJOR concessions.

Posted by: AlaskaVoice | November 21, 2008 9:41 PM | Report abuse

What a crock. So Dumb and Dumber are telling the CEOs how to come back with their tin cups. Interesting that the biggest moochers in government, Pelosi and Reid have the nerve to tell the CEOs to reduce their perks. Oh, yes, Pelosi also had the nerve to talk about accountability. If there was accountability, both Reid and Pelosi would have been tarred and feathered long ago. What a couple of imbeciles.

Posted by: LarryG62 | November 21, 2008 9:42 PM | Report abuse

I suppose here in Australia we are watching with interest and of course, the politicians are to, what is going to happen to Ford, GM in the USA.

Why?

We have 'signed' a 6billion plus 'aid' package for Ford and General Motors Holden in Australia.

6billion over so many years because we know that if the car industry fails here, and it is not the dominant industry as in the USA, then scores of thousands will lose jobs permanently. As well there are longer term strategic considerations.

That 6billion is equivalent to the USA aiding the big three to the tune of 100billion plus over so many years.

It has already been said "we will look like mugs if the USA abandons the car industry".

More than a decade ago in exchange initially for pay rises Australian workers agreed 3% of their pay would go into long term 'pension/superannuation' funds. That is now 9% - it was phased in very slowly to reach that figure.

That has meant a trillion in savings for retirement that would not be there unless this was implemented. All under freedom of choice for funds and funds managed world wide.

If erveryone contributes regularly for retirement and health then the unit cost can be lowered and all benefit.

Would the USA ever go down this road?

Posted by: wandererfromoz | November 21, 2008 9:46 PM | Report abuse

the condition put forth will never be possible by the big three without controlling Union contracts- this has been the main impedements. This has shown by the yrack record- the automakers will never be able compete until and unless the contractual obligations are restructured- the current contracts are eating away at modernisation. Lend them the money, it will be gone and evarates

Posted by: jayrkay | November 21, 2008 9:55 PM | Report abuse

For those who mistakenly read my post and imply that I am putting it all on Labor, please read my post again. I am saying that Labor has to be in this too in order for a real viability plan to emerge. If labor costs are not brought somewhere in line with other makers with US plants, there will not be any long term viability and it will just put off the inevitable. And by the way, yes, the big three made SUVs, against which I have been railing for years, but they were very profitable, and, I might add, was what the American consumer demanded. If gas prices didn't double and kill demand, I doubt that most Americans would have reversed their buying habits to purchase gas sippers. Let's not just blame the big three, lets also look at who was buying these things if you want to assess blame for that end of the current mess.

Posted by: fwillyhess | November 21, 2008 10:00 PM | Report abuse

Don't blame the UAW or expect them to make all the sacrifices. You ignore the fact that they agreed to a drastic decrease in pay for new hires and assumed responsibility for future health benefits. It amazes me that anyone would expect those who worked for 30 years with a pension as part of their compensation should be expected to leave with nothing. That kind of thinking got McCain defeated earlier this month. Working people don't buy that logic. Unions have made huge accomodations and will no doubt make more but to try to make them the villians is totally ridiculous. The villian is management who ignored the trend to high quality and fuel efficient vehicles and continued to produce ugly, poorly built gas hogs.

Posted by: cdierd1944 | November 21, 2008 10:01 PM | Report abuse

Rpatoh, the market share of the 'Big 3' has been in decline since the 70's. Plants are closing and you wish people to look backwards to the good old days, citing what has been.

It's over! Adam Smith is dressed in a hooded black robe, carrying a sickle and is coming after their @$$.

Let's figure out how to deal with the remains, instead of spending major dollars on futile ICU time.

Posted by: juggernautenterprises | November 21, 2008 10:15 PM | Report abuse

Pelosi and Reid can't even run Congress but apparently they are experts in making loans to the dying American auto industry. The "loans" are nothing more than a lifeline to preserve a bloated union healthcare/pension plan. More socialism. It is outrageous that this bailout is even being considered. The Big 3 are DEAD unless the unions make major concessions.

Posted by: truthbomb | November 21, 2008 10:31 PM | Report abuse

Cdierd1944, post a link to your contract and see if it doesn't tick working America off.

I've said before that BOTH of you are to blame and that the Reaper doesn't look at the color of collars before taking his prey.

Posted by: juggernautenterprises | November 21, 2008 10:38 PM | Report abuse

Is anyone interested in whether or not they would make any vehicles anyone would want to buy?

Posted by: michael4 | November 21, 2008 10:56 PM | Report abuse

I am so torn on this matter. My heart says they should get the money and help the workers keep their jobs and benefits, my gut says even if they get the money the workers will still be let go. After all look at the pattern, AIG got money and went on not 1 but 2 vacations (they chose to call them meetings), $710 billion to help homeowners, no mortgages saved yet, why should anyone in their right mind believe jobs will be saved if the Auto Industry gets money. Ironically the push for AW bailout is so close to when Xmas bonuses are given. Big question, who will get them, CEO's or lower level workers? Think about it!!

Posted by: Missmarilyn | November 23, 2008 9:29 AM | Report abuse

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