"Our industry ... needs a bridge to span the financial chasm that has opened up before us," General Motors CEO Rick Wagoner read to Senate Banking Committee from a prepared test.
He explained how the "Dark- days" that the US Car Industry finds it's self, not the fault of management, but is the product of the convergence of factors, most beyond their control. All three explained that the combination of first $140 dollar oil killed demand for their "Hottest" and most profitable products. Just as the cost of fuel started to drop, setting up conditions for renewed interest in SUVs, the deepening global financial crisis, turned consumers into scared squirrels, stocking away nuts for a coming winter.
House and Senate Democrats unveiled competing plans, everyone recognizing the seriousness of the situation, however lawmakers from both parties and the Bush administration showed extreme reluctance to start funneling $25 billion in support, especially with-out demanding tough conditions be a part of any rescue. It seem clear that Congress was looking for assurances that they were not "Throwing good money after bad". Republicans and the Bush administration don't want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion, If any help is given they want the industry to use the $25 billions that had previously been committed for the purpose of retooling. Many in the Democratic party, have expressed concern that if the original funds, designed to help the US Auto industry shift to produce more high-mileage and Hybrid cars, are used as a bridge loan, that we are "Stalling the problem- not solving it".
Ilene Lubell, an advertising executive stated " It's hard, I'm watching dealers I represent, that are doing everything right, but it's like they are being asked to swim up-stream with a boat anchor wrapped around their legs."
Many on the hill made it clear that their sympathy for the industry was tepid at best. Christopher Dodd, D-Conn, the current Banking Committee Chairman, told Wagoner and his fellow leaders at Ford and Chrysler that the industry was "seeking treatment for wounds that were largely self-inflicted." At the same time he realized that "Hundreds of thousands would lose their jobs if the companies were allowed to collapse".
Sen. Mike Enzi, R-Wyo., made it clear he felt that the current financial crisis "is not the only reason why the domestic auto industry is in trouble."
He brought up, what was clearly the 800 lbs gorilla in the room; that much of the problem lies with the "costly labor agreements" caused by The Big 3 allowing the unions to get too powerful, plus the high cost to fund pensions, that put the U.S. automakers at a disadvantage with their foreign competitors.
Wagoner said that despite some public perceptions that General Motors was not keeping pace with the times and technological changes, "We've moved aggressively in recent years to position GM for long-term success. And we were well on the road to turning our North American business around."
"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."
Failure of the auto industry "would be catastrophic," he said, resulting in three million jobs lost within the first year and "economic devastation (that) would far exceed the government support that our industry needs to weather the current crisis."
Auto industry facts:*3 million jobs lost in the first year*U.S. personal income reduced by 150.7 billion*Government tax loss over 3 years 156 billion*The level of economic devastation far exceeds the 25 billion of government support the US Auto industry is asking from Congress.
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Paulson, testifying on the House side, defended the administration's handling of the massive $700 billion bailout for the financial industry and said it should remain off-limits for Detroit, no matter how badly the automakers need help.
In an e-mail marked "urgent" and sent to owners of GM vehicles, Troy A. Clarke, president of GM North America, pleaded with them to e-mail their representatives in the House and Senate in support of a "bridge loan" for the industry - and ask their friends and family to do the same. http://gmfactsandfiction.com/
"Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid," Clarke said in the message.
But the prospect now of millions of unemployed workers is not pretty.
Congressional leaders were working behind the scenes in reach a compromise, but the new rescue plan,opposed by President Bush, appears stalled on Capitol Hill,
"My sense is that nothing's going to happen this week," Sen. Bob Corker, R-Tenn., said at the opening of the hearing
With a $2,000./ vehicle legacy cost, it is difficult to call this a level playing field, something needs to be done to keep America's manufacturing industries viable.
Larry Lubell
Urban News Blog
Posts
2 comments:
The UAW needs a little tough love. It derailed the Cerberus deal at Delphi. Today GM suffers a loss of about $2,000 per vehicle sold. On the other hand Toyota whose employees are not part of the UAW earns a profit of about $1,200 per vehicle sold. If GM was able to operate with labor prices near Toyota’s it would have pocketed an additional $29,715,200,000.
GM bailout nonsense
Thought you might be interested...
From Radio Sales Today……….
GM Tells Congress It Plans to Slash $600M in Marketing
As the Big Three U.S. automakers today unveiled business plans they promised to Congress to secure government funding, specifics on marketing and advertising spending went largely unaddressed by Ford Motor Co. and Chrysler -- though General Motors Corp. outlined a program to slash $600 million in spending by 2012 and support only half of its eight brands. GM said it would concentrate its marketing and product development in the U.S. on four brands: Chevrolet, Cadillac, Buick and GMC. Those account for 83% of its current vehicle sales in the U.S., but Chief Operating Officer Fritz Henderson in a conference call today said the profitability of those four "is much higher" than 83%. He did not provide specifics. GM will make "significant reductions to advertising and promotions" as part of the paring of brands, Mr. Henderson said. The company's filing shows that advertising and promotion spending will account for $3.2 billion of its total $30.2 billion in structural costs this year. But by 2012, GM said it plans to cut $600 million in ad and promotions, reducing its outlay to $2.6 billion as part of a move to reduce annual structural costs to $23.2 billion by that year. GM will have 40 vehicle nameplates in 2012, down from 48 this year and 63 in 2004. That leaves Pontiac, Saturn, Saab, and Hummer facing dubious fates, although GM said Pontiac will continue as a specialty niche brand within the Buick-GMC division. Mr. Henderson said Pontiac would have a "specialized vehicle like the Solstice [roadster] although I'm not saying that's the vehicle going forward." GM Chairman Rick Wagoner, also on the conference call, said because the company has different franchise deals with Saturn dealers, it will accelerate talks with those retailers to explore alternatives for the brand. GM will immediately start a global strategic review of Saab, which could be sold. The company has been conducting a strategic review to sell Hummer for several months. GM, the biggest of the three carmakers, said it expects an initial draw of $4 billion this month and is seeking term loans of up to $12 billion to provide adequate liquidity levels through the end of next year. The automaker said it intends to repay the loans as soon as 2011.
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