Congress near a Big Three deal, with strings attached
US automakers are likely to get $15 billion in federal loans, but lawmakers insist on industry restructuring.
from the December 8, 2008 edition
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David Cook talks with
Monitor staff writer Gail Chaddock about difficulties facing Detroit's automakers.
"We're not going to write a check, for any amount of money, without some serious conditionality associated with it," said Sen. Christopher Dodd (D), chairman of the Senate Banking Committee, after a hearing with Detroit CEOs and the head of the United Auto Workers (UAW).
Conditions proposed during the hearings ranged from changes in the automakers' product mix to a government-required merger between Chrysler and General Motors (GM) to a mandate for new contract negotiations that would put compensation for Detroit auto workers on par with nonunionized workers at Nissan or Toyota plants in the US.
Sen. Bob Corker (R) of Tennessee proposed requiring GM to restructure its debt, buy out bondholders at a rate of 30 cents on the dollar, and renegotiate labor agreements to put United Auto Workers on a par with workers for foreign-owned auto companies with plants in the US.
"I know that you haven't invested in product development. I know you don't have the technologies to really compete as a stand-alone. I know that your dealership levels all across the state might be really valuable to a foreign company coming in," Senator Corker said at Thursday's banking panel hearing.
On the Democratic side, Sens. Jon Tester of Montana and Sherrod Brown of Ohio pressed the auto executives for commitments that they would not use taxpayer dollars to invest in overseas operations.
"Why give American taxpayer dollars to somebody who is going to invest it in some other country than this country? That's been a problem," Senator Tester said, referring to reports that GM is planning to expand operations in Mexico.
In response, GM Chairman and CEO Richard Wagoner said: "No funding that comes out of this would go to fund a facility overseas."
Opponents of a bailout say it won't solve the structural problems in the US auto industry. If a bridge loan is granted, they warn, CEOs will be back for more.
"This is a bridge loan to nowhere," says Sen. Richard Shelby (R) of Alabama, the top Republican on the Senate Banking Committee. "They need 60 percent of the management to go and about a 40 percent downsizing of the workforce."
Rep. Spencer Bachus (R) of Alabama, the ranking Republican on the House Financial Services Committee, says any bailout of the auto industry won't be fair to "the vast majority of citizens whose wages, health benefits, and pension plans are less generous than those of the management and labor force of the Big Three."
But Senate GOP leaders are not threatening to block consideration of legislation on a bailout. "I look forward to reviewing the legislation ... to address the difficulties in our auto markets. Our first priority must be to protect the hard-earned money of the American taxpayer," said Senate Republican leader Mitch McConnell on Saturday.
• Reuters material was used in this report.
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