WASHINGTON, Nov. 15, 2008
Pelosi Outlines Auto Bailout Package
Speaker Says Automakers Would Have To Agree To New Fuel-Efficiency Standards, Commitment To Innovation
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Play CBS Video Video U.S. Auto Industry Stalls Three million jobs could be at stake if one of the big three automakers fails, and the prospect of a bailout is looking bleak. Michelle Miller reports.
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Video Automakers Running On Empty A bailout for the auto industry may be looming, but there may not be enough money to save them, reports Anthony Mason. Maggie Rodriguez talks to Mich. Gov. Jennifer Granholm about the ripple effect.
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Video Auto Industry Won't Go Down Washington knows the significance of keeping the auto industry above water, but the increasing number of layoffs does not bode well for the future. Priya David has more.
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House Speaker Nancy Pelosi of Calif. gestures during a news conference on Capitol Hill in Washington, Nov. 5, 2008, to discuss Tuesday's presidential election. (AP Photo/Susan Walsh)
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Speaker of the House Nancy Pelosi, D-Calif., second from right, and House Majority Leader Steny Hoyer, D-Md., right, pose for a photo before a meeting with, from left, General Motors Chief Executive Officer Richard Wagoner, Jr., Chrysler Chairman and Chief Executive Officer Robert L. Nardelli, and United Auto Workers President Ron Gettelfinger on Capitol Hill in Washington, Nov. 6, 2008. (AP Photo/Susan Walsh)
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In-Depth Q&A: Big Three Bailout? Why Detroit's automakers might get a rescue package
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
Pelosi, D-Calif., did not disclose the amount of funding House leaders intend to seek for the industry - automakers have been seeking $25 billion in loans to stabilize their sinking companies. But she said the funding should come from the $700 billion financial bailout approved by Congress in October.
"A restructured, competitive American automobile industry will continue to play a crucial role in our national economy and in the global marketplace," Pelosi said in a statement.
The move sets up a conflict with the White House, which has opposed using the bailout funds to help General Motors Corp., Ford Motor Co. and Chrysler LLC. The Detroit companies have been battered by an economic meltdown that has choked their sales and frozen credit.
Car sales in the U.S. are at a 25-year low - forcing dealers to offer as much as $15,000 discounts on 2008 SUVs and trucks, reports CBS News correspondent Michelle Miller.
"These companies are in really dire straits," auto analyst Rebecca Lindland told CBS News.
General Motors is burning through money. It has $16 billion on hand but warns it may run out of cash in the next 45 days, reports Miller.
"If one of them goes bankrupt, there is going to be a tremendous, tremendous ripple effect throughout the economy," said Lindland.
But not everyone agrees.
Dan Ikenson, an economist at the CATO Institute, estimates only 200,000 jobs are at stake. He actually sees bankruptcy as the best option.
"Once [bankruptcy] happens, the fortunes of the other two producers will improve," he told CBS News.
Bankruptcy, Ikenson says, could allow the auto industry to renegotiate their union contracts. The Big Three's workers make, on average, $74 an hour - the highest paid in the country. Their Japanese counterparts, on the other hand, offer their non-unionized American workers just $47 and hour.
"GM, Chrysler and Ford made very bad decisions regarding the products they made over the past few decades and as respect to how they dealt with labor relations," Ikenson said.
U.S. automakers are lobbying lawmakers furiously for an emergency infusion of cash. GM has warned it might not survive through year's end without a government lifeline.
President-elect Barack Obama said he believes that aid is needed but that it should be provided as part of a long-term plan for a "sustainable U.S. auto industry" - not simply as a blank check.
"For the auto industry to completely collapse would be a disaster in this kind of environment," Obama said in an interview with CBS's "60 Minutes" that will air Sunday. "So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan - what does a sustainable U.S. auto industry look like?"
Pelosi said the plan would call for "immediate, targeted assistance" and must include several principles, including the restructuring of the companies "to ensure their long-term economic viability," new fuel-efficiency standards, and the development of advanced vehicles.
She said it would include "even stronger limits on executive compensation and assurances to protect the taxpayer." House aides said the legislation was still being developed and a specific funding level had not yet been reached.
Pelosi did not mention any plans for the UAW to make any concessions as part of the legislation. UAW president Ron Gettelfinger told reporters earlier Saturday the problem is not the union's contract with the auto companies.
"The focus has to be on the economy as a whole as opposed to a UAW contract," Gettelfinger said. The union has said it made several concessions in its 2007 labor agreement, setting lower pay for new hires and placing retiree health care liability into a trust run by the UAW.
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Facing an uphill battle in Congress and stiff opposition from President George W. Bush, supporters of the government bailout have considered reducing its $25 billion size. A House aide said Saturday that $25 billion was still the amount being discussed.For the auto industry to completely collapse would be a disaster in this kind of environment.
President-elect Barack Obama"There's a need for immediate action," Alan Reuther, the United Auto Workers union's legislative director, said Friday. He said one option under consideration was a smaller, more targeted amount of funding "that would get the companies through to March."
Sen. Debbie Stabenow, D-Mich., said negotiations were taking place among senators on what the amount should be. "This is about getting enough votes to be able to solve the problem," she said.
Other auto suppliers and dealers with showrooms empty of customers plan to join the effort Monday when Congress returns following the Nov. 4 elections. The key Senate vote on preventing opponents from blocking the package could occur as early as Wednesday.
Democrats want to carve a portion of the $700 billion that the Bush administration is using to bail out banks, insurance companies and other financial institutions. The White House on Friday came out firmly against the approach.
White House press secretary Dana Perino said the administration would rather Congress expedite the release of a separate $25 billion loan program for the development of fuel-efficient vehicles and have the loans used for more urgent purposes as the companies struggle to stay afloat.
"Democrats are choosing a path that would only lead to partisan gridlock," Perino said.
Pelosi said Saturday that any attempt to divert money from the loan program would be a "step backward in assuring the viability and competitiveness of the U.S. auto industry."
Environmentalists and Pelosi have vehemently opposed using that money for anything other than designing and building vehicles that get higher gas mileage and produce less pollution. Democrats hold a 37-seat majority in the House and bailout supporters foresee little difficulty winning its passage there.
But the measure needs 60 votes to survive in the Senate, where Democrats will hold a razor-thin 50-49 majority when President-elect Barack Obama gives up his seat on Monday. A furious search was on for a dozen Republicans to break the anticipated filibuster from opponents.
Several Republicans have already lined up against it. "Like most Americans who are concerned about the direction of our economy and more federal spending, I must also ask - when is enough, enough?" said Sen. John Cornyn, R-Texas.
Two Republicans - Kit Bond of Missouri and George Voinovich of Ohio - said they will back the plan. Several other Republican senators have signaled they might accept a rescue if strict conditions are put on Detroit's Big Three companies, including management and salary changes, union concessions and a commitment to making more fuel-efficient vehicles.
Bond, whose home state of Missouri has several auto plants, said the concept of government mixing with the free market was "very troublesome." But he added, "We have to act in unique times of crisis when tens of thousands of Missouri workers are in danger of losing their jobs."
Democrats are modeling their bill on the bailout terms that the Bush administration has used for doling out $290 billion to banks and insurance companies. The government would get an ownership stake in the auto companies in exchange for the loans to ensure that taxpayers would get their money back if they return to profitability.
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Michelle Obama tells how her role as the First Lady has changed her perspective.
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See all 103 CommentsI am Democrat.
I am for Union.
I say "NO" to the auto bailout, unless the top 5 from all three of them get canned.
Electric is here and should be promoted much better.
30 MPG is a joke.
Pelosi did not mention any plans for the UAW to make any concessions as part of the legislation. UAW president Ron Gettelfinger told reporters earlier Saturday the problem is not the union''s contract with the auto companies.
Pelosi, Reid, Obama and the rest of the Democrats simply want to keep the UAW (and their campaign contributions) happy. Instead, why not let them go bankrupt, and then offer them DIP (debtor in posession) financing. That would allow the judge handling the case to void union contracts and force concessions, get rid of management and change their pay/bonuses, and best of all, the taxpayers'' money would be FIRST in line to be repaid. The DIP financing gives us the "first chance" at the money coming in to these companies, instead of just being an ordinary shareholder. If we do not have a "preferred" status in some manner, then we will just be ordinary shareholders, and if these companies go bankrupt anyway, we get zip.
Accountability,guaranteed payback and concessions, big concessions by the UAW, or don''t give them anything.
www.randallsopinions.com
Posted by incog-nito at 02:56 AM : Nov 17, 2008
Let me clarify that tariffs should only be used against countries that impose artificial trade barriers on their imports or otherwise subsidize their exports, or have working conditions that make it impossible for U.S. workers to compete against.
Posted by machineguy at 12:59 AM : Nov 17, 2008
I have no problem with it. Keep in mind that it''s essentially an import tariff, something proponents of "free trade" are vehemently against.
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Posted by incog-nito at 12:19 AM : Nov 17, 2008
The only way to stop the innevitable failure is to do something different. A bailout only prolongs the current situation. Our country is in decline because we are not competitive. It doesnt matter who funds the junk, its still junk. Some suggest we tax foreign cars so americans buy our own cars. Does anyone see the problem with these thoughts?
The only way to lead the world again is to be the best. When do we get started?
Dump the Fed.Your money is just printed on a machine no Gold & Silver for backing just fiat or Belief not intrinsic value
Since they are going in the wrong direction when it comes to competitiveness and viability, wouldn''t a step backward would be in the right direction?
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Posted by worldpirate at 09:14 PM : Nov 16, 2008
I think buy American is a good idea but be careful how you apply it. Taxing imports wont work because they build Toyotas and Volvos here. Worse, if you play the "tariff game" the other countries can cripple us. We arent "top dog" anymore.
tarifs can help for a short while (3-4 years max) but in the long run, we need to build good products that people want.
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Posted by DJ_IL at 09:13 PM : Nov 16, 2008
Ive seen your other posts and think we are in pretty much agreement. I agreed with the bank bailout because I felt they had a gun to my head. I understand that if banks freeze up the money we go into depression like in 1929. But even then I felt I ws being robbed.
In the case of GM we have other automakers already in our country who are successful. I say sink or swim.
I also think these bailouts are a poer gram for Pelosi. Notice that she took all the limelight for meeting with GM last week. Almost overshadowed Obama with it.
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Posted by lovedw at 08:30 PM : Nov 16, 2008
Hey, Pelosi also helped Barney Frank lead the banking industry into ruin this Fall and then scolded everyone else for having to bail them out.
Do you see a power grab here? Eventually we wil all ask Mz Nancy for our food and sustenance. She will only give it to us if we are nice and behave as she wants.
I am a middle class who votes GOP because I know that big government will take care of big business adn big unions before it ever takes care of me. Always has, always will.
Its simple folks, Ohio is a "decider" in elections, the UAW contributes campaign money, the UAW votes. You and I get taken to the cleaners again.
I say NO BAILOUTS, FOR ANYONE.
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