"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
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