The Real Price Of The Auto Bailout

Some Estimates As High As $75 Billion-$125 Billion To Save Industry, Reports CBS' Sharyl Attkisson

(CBS/AP)  U.S. automakers drew fresh skepticism from lawmakers Thursday in a rocky confrontation over their pleas for an expanded $34 billion rescue package they say they need to survive.

After the six-hour hearing before the Senate Banking Committee, General Motors Corp. CEO Rick Wagoner said he's optimistic that Congress will reach an agreement to help his company survive its critical cash shortage.

Wagoner said he's encouraged that Banking Committee Chairman Chris Dodd, D-Conn., expressed an interest in staying in Washington until a rescue plan can be crafted

But with time on the current Congress running out, opposition to the bailout appeared to be as strong as last week - before Detroit's Big Three auto chiefs returned to Congress with more detailed plans on how they would spend the money.

And congressional analysts said one bailout plan under consideration would fall short of what the carmakers want.

Several lawmakers in both parties are pressing the automakers to consider a so-called "pre-packaged" bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Big Three have publicly shunned the notion, saying it would kill sales by destroying customers' confidence - but executives have indicated in recent days that it might ultimately be necessary.

The executives all agreed in Thursday's hearing that a multibillion-dollar bailout deal would include a supervisory government board that could order major restructuring of the companies if deemed necessary for survival - similar to the results in many reorganizing efforts under bankruptcy law.

Perhaps the harshest dose of reality came from economist Mark Zandi, reports CBS News' Sharyl Attkisson

"The $34 billion in loans requested by the Big Three will not be sufficient for them to avoid bankruptcy at some point in the next two years. They would ultimately need, in my view, somewhere between $75 billion and $125 billion to avoid this fate."

The automakers may know that. CBS News dug into the numbers and found they're actually seeking way more money than they appear to be:

In addition to the $34 billion at issue today - $18 billion for GM, $7 billion for Chrysler and $9 billion for Ford - each company has applied for billions of dollars in federal funds from the Department of Energy, another $8 billion for GM, $8.5 billion for Chrysler and $5 billion for Ford. On top of that, they're seeking a piece of the $700 billion bailout fund aimed at Wall Street, though they haven't publicly disclosed the amounts.

That puts the real taxpayer sticker shock somewhere above $55.5 billion.

United Auto Worker union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators at that any kind of bankruptcy, even a pre-packaged one, was not "a viable option." Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.

He also warned that in the absence of action by Congress: "I believe we could lose General Motors by the end of this month." He said the situation was dire and time was of the essence.

Meanwhile, Rep. Barney Frank, a Democrat, who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said President-elect Barack Obama needs to play a more significant role on economic issues.

"He's going to have to be more assertive than he's been," Frank said at a Consumer Federation of America conference in Washington. "At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time. I'm afraid that overstates the number of presidents we have. He's got to remedy that situation."

At the Capitol building, the Big Three chief executives told the senators they hoped to make amends for past blunders. "We made mistakes, which we're learning from," General Motors chief executive Rick Wagoner said. Ford chief executive Alan Mulally also acknowledged big mistakes, saying his company's approach once was "You build it, they will come."

Chrysler CEO Bob Nardelli made similar comments in an interview with CBS News anchor Katie Couric Thursday.

"We produced more vehicles than our customers wanted, then slashed prices," he said. But as a result of these past mistakes, "we are really focused," he said.

Congressional Democrats have urged the administration to tap into an already enacted $700 billion financial bailout program to help the auto industry. The Bush administration has said that it has no intention of doing so, and would prefer aid be taken from an earlier $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.

But congressional budget analysts have privately told top Democrats that tapping that program wouldn't come close to covering the $34 billion that carmakers now say they need to survive.

It would yield only $10 billion to $15 billion in short-term loans, the analysts claimed, according to congressional officials who spoke on condition of anonymity because they were not authorized to disclose the analysis.

The Big Three executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a botched appeal for $25 billion in which they were chided for flying on private jets to beg for money.

Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would repay taxpayers by 2012 and would devote itself to manufacturing "fuel-efficient cars and trucks that people want to buy."

The Big Three executives said they would be willing to work under a federal oversight board as a condition for receiving financial aid from the government.

Dodd and several others on the panel asked them if they would agree to a setup like the one established for the U.S. bailout of Chrysler Corp. in 1979.

Sen. Mike Crapo, a Republican, said such an oversight board would be "basically a federal restructuring trustee" with some of the same powers as a bankruptcy court.

"I did not hear any objection from any of the three of you to the establishment of an oversight board or whatever we call it, of a federal oversight entity that has the literal authority to impose restructuring conditions and to enforce those as a matter of law as these dollars are utilized. Am I correct?" Crapo asked.

The three answered in the affirmative, although Ford's Mulally said, "I probably need to think about that a little bit. It sounds right, but I just don't know all of the implications of that."

Sen. Richard Shelby, the senior Republican on the panel, complained that the pricetag on the package had jumped since the trio last appeared just two weeks ago. He pressed the automakers to explain why, and to justify how such aid would not simply "prop up a failed business model for a few months ... and how are you going to pay it back to the taxpayers?"

Banking Committee Chairman Chris Dodd, a Democrat, supports helping the industry, but said that detailed plans submitted earlier this week on how the companies would use low-cost federal loans to reorganize still left a lot of questions unanswered.

But Dodd also said that doing nothing "plays Russian roulette with the entire economy of the United States."

[biblethumpar]

it would help their cause much more if they had
crawled the last 5 miles on their knees barefooted, holding a picture of the Virgin mary in one hand and
hitting their backsides with a heavy piece of waterhose,

that wouls show humility.

[inventagod2]

This illustrates just how far greed and stupidity will take ya...

[inventagod2]

''Some 3,500 UAW members currently receive an average of $50,000 a year under the jobs bank program CBS News'' Dean Reynolds reports, something the union has acknowledges is difficult to explain.''

CBS laying off the proofreaders?

[ltk01]

ATTENTION CONGRESS: Just say "NO"...now move on.

[zpolitic]

Detroit makes many great cars, and their quality is equal or better than the foreign cars. Toyota, Mercedes, and VW have all experienced quality problems over the last 10 years, and have not been penalized for it by the automotive press. Government regulation is partially responsible for the uncompetitive environment the Big Three are in: exempts foreign car companies from unions; doesn%u2019t enforce trade laws that allow MASSIVE subsidies by the parent countries of the foreign companies ($4000/Japanese car, $7000/Korian car, $2500/German car, etc.). This doesn%u2019t include the fact that other countries provide healthcare. Would you buy that Hyundai if it cost $7000 more? The Big Three are the heart of American manufacturing. Without a manufacturing sector, we cease to be a great power. We have thrown over a trillion dollars at the finance sector without any strings or guaranties. They have the most easily replaced skills in our economy, and were the ones responsible for getting us into this mess in the first place. Detroit is asking for a loan %u2013 not a bailout. It is time to leave the completely failed Supply Side policies behind, and implement Demand Side policies with proven track records.

[mogie82]

What hotel did they all stay at?

Is this a bailout or a loan that will be paid back?

[koyt1]

Let me see if I understand this. One and one-half weeks ago they wanted $25 Billion. Now, it is $34 Billion. What will next week bring, $50 Billion? Congress, please say NO. Let them reorganize like the airlines did. They will stay in business and be much better in the long run.

[truth_police]

One can''t help but notice that the analyses contained in this article continue to make the same mistakes in reasoning that the auto industry itself has been making for decades. These analyses bloat the importance of short-term profit interests, while trivializing, demeaning and downgrading the importance of prudence in the long-term. This article also insults the intelligence of the consumer (probably justifiably) as having short memories, myopic short-term obsessions and absolutely NO long-term wisdom, prudence or honesty in making their purchasing decisions. This characterization may now be grudgingly giving way to the "new reality" that is now becoming inescapably apparent, namely, the reality that the limited manipulated oil supply - the environmental crisis and U. S. oil dependence concerns are never going to go away and are only going to get worse over time. But even if the general public is too stupid and short-sighted to grasp this, it is up to those in the auto industry to exercise much greater foresight and insight. They could gear all their billions of dollars in advertising toward reminding consumers of the true ''new reality'' and the inevitability of more impending crises to come if we do not change our ways. As it is now, billions are being squandered on content-barren, mindless advertising tripe that has zero informative value or content.

[ozarkbard]

NO BAILOUTS! LET THEM FALL!!!

[combatvet03]

Chris Dodd, please, tell the truth now, how much money are you getting from lobbyists for wasting tax payer dollars. Russian roulette is just a scare tactic, explain your position in real terms and start with how our banking and finance system got in the current mess.

[bailthisout]

So the question must be asked - how has Washington DC changed?
It is still full of greedy and corrupt politicians except that a larger majority are now Democrats.
When will ignorant Americans really understand their power to protest?

[cpelzar--2008]

Dodd, Wagoner, Mulally, Nardelli, Gettelfinger

Better known as:

Dumb, Dumber, Dumbest, Dumberer, Dumbest of all.

In no particular order.

They all speak as if the know what they are doing.

Children should not play with dangerous weapons nor should Politicians be given any money to dole out to their contributors.

They are all thieves.

[cpelzar--2008]

The auto Industry spent 50 million this year in lobbying Congress.

Good investment on their part, they get billions in free loans which they will never pay back.

The money went to those who are deciding if they get the loans.

This is pure criminal and Dodd is the ring leader.

They should all be arrested....

What a joke this is...

[ceres5]

I wonder of the $34 billion dollars they are asking for assistance, how much of that money will go their pockets directly or indirectly. It is difficult to understand how come these people, who had such a poor performance as business leaders, are making more than 30 times the salary paid to the President of the United States. When these three big shots say that they will work for only a $1, it is only a joke. I will believe their sincerity if they return a significant amount of the millions of undeserved dollars they have received in the last few years.

[edward1975-2009]

I believe each taxpayer should go before Congress and make a plea for a mere 10 million to clear our debt, stimulate the economy by paying off mortgages, credit cards and whatever, thus freeing up monies for the banks and re-tooling our households to be ecologically sound. Thus eliminating any need for bailouts and creating new jobs for all those who will be doing the re-tooling. Makes about as much sense as the rest of these clowns.

[jerr11]

Let them fail.

It''s survival of the fittest, not intelligent design.

These democrats are getting to be as dumb as their republican counterparts.

[daffy64]

How can these guys afford to work for $1 a year? Oh yeah, they''ve been overpaid for the last eighty and have swiss bank accounts.

At least they drove to this meeting in brand new cars instead of flying. That''s a small lesson in humility.

[cpelzar--2008]

How can these guys afford to work for $1 a year? Oh yeah, they''''ve been overpaid for the last eighty and have swiss bank accounts.

At least they drove to this meeting in brand new cars instead of flying. That''''s a small lesson in humility.

Posted by daffy64 at 11:25 AM : Dec 04, 2008

Its called seliing their stock options, they have millions of them. Govt. gives them their money, stocks go up in value and wham they start selling them.

We are idiots if they get any money. This is criminal.

[edward1975-2009]

johndevinejr: It''s Democratically controlled Congress now. So what will change except Pelosi and crew will rubberstamp Obama instead of a lame-duck President Bush. Big freakin change!

[cpelzar--2008]

So the question must be asked - how has Washington DC changed?
It is still full of greedy and corrupt politicians except that a larger majority are now Democrats.
When will ignorant Americans really understand their power to protest?


----------------------------------
----------------------------------------
------

Posted by BailThisOut at 11:08 AM : Dec 04, 2008

Just in case you don''''t understand. Right this minute the President of the United States is George Bush. No new Democratic Congressmen or Senators have taken their seats.
It is the same government as it was on November 1, 2008, Nothing will change until January 20, 2009.
So the question must be asked; How far IS your head up your A$$ ?

Posted by johndevinejr at 11:26 AM : Dec 04, 2008

Oh please, are you mentally challenged, Obama was for change because the lemmings wanted to hear that. Now he is on power and brought in all of the same old.

It was all a lie, but the left is clueless because they hated President Bush so much, they don''t really care nor can they state matter of factually what "change" is.

Are we out of IRAQ earlier? No

The list is very long.

The new "Change" is "Same"

[renojmc]

This is nothing but a bailout for the UAW, and Dodd knows it. Like most democrats, he kneels at the alter of the labor unions. Of course he''s for supporting the auto bailout. Without it, the UAW is history.

[cpelzar--2008]

How come I am being asked to lend money to a pack of idiots who have already squandered one bailout package?
If it weren''''t for the workers I would say to let them all go down the tubes. At the very least the entire management of these companies should be replaced.
And NOBODY deserves the salaries these guys get.

Posted by johndevinejr at 11:30 AM : Dec 04, 2008

Management needs to fired and the UAW disbanded.

[steamed2]

Senate Banking Committee chair Christopher Dodd says "letting the Big 3 fail would amount to playing "Russian Roulette with the economy of the United States." That may be, but why is it we find ourselves in this position? As a retired financial crimes investigator I can only shake my head in amazement at the clueless general public. It''s the Republicans fault, it''s the Democrats fault, it''s the Tooth Fairy''s fault! The only thing your Congress has done is an outstanding job of sowing confusion so that taxpayers don''t notice the two and a half billion-plus dollars paid by professional lobbyists to our honorable Senators and Congressmen in just the past ten years alone to dismantle 80 years of regulatory laws protecting us. Taxpayers continue to act like domestic sheep, no wonder they keep getting sheared. There are reasons for the mess that are easily identified (greed, graft, collusion) and they can be traced back to the ''bad actors'' (Congress) that are responsible! Stop being distracted by rhetoric and check and check out some of the facts- http://www.peak.org/~LW584

[inventagod2]

No bailout, boys.
Congress is leaving town in a few days, when they return, it''s a new game, new boss.
Too bad.

[ramos937]

Take-home pay at U.S. automakers now averages $28 an hour - close to what Toyota, Honda, and Hyundai pay their workers, Reynolds reports. It''s the Detroit-negotiated health and pension benefits that have changed the equation. Factor them in and labor costs are $73-dollars an hour for Detroit, but only $44 for non-Detroit producers.

------------------------------------

This is an impossible situation. As long as the $73/$44 inbalance remains, there is no way the big 3 can survive even with federal assistance.

Chapter 11 would give the big 3 the chance to bring the inbalance more in line with non-Detroit producers and thereby be competitive. Congress needs to make the big 3 demonstrate how, by using present day cost cutting and UAW approved concessions this imbalance can be cured. Failing that, there is no cure.

[jumkey]

Posted by renojmc

Finally, exactly the truth.

Republicans have been trained to revile and hate the middle class and they will go to any ends to destroy it - including killing America. Why? Because they believe that if you were really worthy you''d be rich, but since most Republicans aren''t rich they need someone to blame for their "failure" - and that means others of their own class. The real rich benefit greatly from this belief system so they encourage it.

The UAW (and unions in general) are symbols of middle class stability and non-corporate power, so of course they companies want to destroy them. But since unions have been declining into oblivion for at least the last 50 years and are really no longer a force in society the mindless shilling of the renojmc''s of the world become increasingly bizarre and out of context.

Either way we go in this debacle we (and by "we" I mean the US) lose: we gave away a whole bunch of our taxdollars to the rich OR GM goes out of business and millions of jobs are lost.

It''s a Republican wet dream.

[tawpdawg111]

1.1 BILLION SHARES OUTSTANDING AT 5 BUCKS A SHARE...sorry for the caps.

America can BUY this company for 5.5 billion, install competent leadership for a reasonable salary and produce electric vehicles with the EV technology they buried in 1995 and tell the sheiks to lube with their oil and pound sand, putting MILLIONS of Americans to work on new and innovative industry, all for a fraction of the LOAN amount.

Problem solved.

NEXT!

[jumkey]

Posted by ramos937

Socialized medicine.

There, solved it for you.

[getoffmine1]

it comes down to this, if you don''t have at least a B.A. degree from an accredited university, you should not be making over $20.00 an hour, no matter what you do. If you don''t have anything more to offer your employer then the rest of the work force you should make an average salary.

[carpriddler]

The American Auto Industry
Inferior designs %u2013 No stability, reliability, and safety

Inferior engineering %u2013 Built in obsolescence, poor performance, and mileage

Management %u2013 Bureaucratic and Intellectual gridlock

Union %u2013 Intellectual gridlock

Employees - Drive foreign cars

Marketing %u2013 Primordial

Sales %u2013 Conmen, alcoholics, drug addicts, criminals, tough-guys, and ego maniacs

[getoffmine1]

Socialized medicine.

There, solved it for you.

Posted by jumkey at 11:50 AM : Dec 04, 2008

and whose tax dollars should go to paying for the health care for the poor and unemployed? Not mine, i already have Blue Cross coverage though my job and my rates are very low. Why should I help pay for someone elses health care when I''m doing just fine on my own. Besides we have a population problem.

[misssuzq]

Don''t care what anyone says about their employee benefits or practices, Wal-Mart IS the place to go as far as retailers go, and if other retailers AND the AMERICAN auto industries would figure this out, they would sell MORE less expensive products, not just a FEW expensive ones.

Morons - businesses run selfishly and stupidly are the reasons for our economy problems.

[downtowner97]

This same exact thing has happened before. United, PSA, and other airlines failed, and the US government let the remaining companies absorb the planes, the pilots and the passengers. No hell on Earth, no economic meltdown, no anarchy in the streets. As far as I can tell, you can still get a ticket and fly on a plane.

[byeneocons]

You are already paying for the health care costs of the poor. Doctors and hospitals have to raise their fees to exhorbitant levels in order to compensate for those who never pay, or can''t pay.

One way or the other, you''re paying.

Wouldn''t it be smarter to find an organized way to make sure you''re NOT paying for the spillover costs?

[demdump]

Cruide oil 45.7 Bush''s fault.

[georgiadog8]

I don''t care who you are if you are the CEO of any company. You should never be rewarded for failure with a obscene salary and golden parachute. Especially if your ship sinks and you are the only one with a life boat. What kind of logic or fairness is that? It is BS that is what it is! The CEOs should be responsible for their actions and decisions.NOT THE TAXPAYER

[demdump]

GM,FORD,CHRYSLERS OUT OF BUSINESS BUSH''S FAULTS.

[merlgrey]

mexico 2.0

all the workers could go out of the country to work in foreign factories and send thier checks back home.

[misssuzq]

One thing about the bailout - sadly, these morons have a huge trickle down effect and more than auto manufacturing sites will suffer the consequnces of their ignorance - car dealerships with mechanics, etc. will close and those employees will be on the streets.

Bring down the cost of the new 2008-2009 cars already built - sell them ALL and see where that takes them before taxpayers and good workers take the hit.

[bm6005]

I see all of the lower middle class haters are out today. All right, here''s the deal, majority wins in America so we won''t bailout the big 3. Not gonna argue at this point, you folks have shown your contempt for "Joe the Factory Worker" many times before. I will sit on the sidelines and watch and remind all of you pencil pushing jack-azzes as YOUR situation becomes bleaker. I''m retired, I don''t give a s.hit! As the unemployment lines swell, as home sales and value plummet in automaking areas. As all of the economic malaise spreads throughout the country I''ll listen to you folks whine, **** and moan
about the "multiplier effect" of either up or down economies and remind you that you wanted the Big 3 underwater. How come $700 billion for paper masterbaiters with no strings and nothing for those who work with their hands who have to provide business plans to CONgress. Now there''s a group that knows nothing of business!!

[getoffmine1]

Thats right and I shall fix my own plumbing.

Posted by lady_organs at 11:54 AM : Dec 04, 2008

good idea, go and get one of those home imporvemnt books and you can fix just about anytihng in your house. I have not hired a repair person in years and everything in my house is maintained just fine.

[georgiadog8]

Socialist!

Posted by lady_organs

Rewarding failure is not socialism ...moron. I''m no a "liberal either" Sticks and stone may break my bones but words will never harm me. Get a brain

[getoffmine1]

Y
ou should have your medical insurance taken away. Its a cost to the employer!

Posted by lady_organs at 11:57 AM : Dec 04, 2008

Then I would leave and go somewhere else. There is still demand for what I do even in a recession. Besides the company could not afford to lose the amount of revenue i generate each year, heck I''m at 109% for the year so I am just basically killing time coming in here everyday my year is finished. What they pay for my families health care is a drop in the bucket compaired to what I generate for our shareholders.

[getoffmine1]

I''''d rather hire illegal aliens and make them work for less than minimum wage.

Posted by lady_organs at 12:00 PM : Dec 04, 2008

Why, when you could instead keep all of your money by doing a little work? This way the illegals go home and place a burden on their govt''s, where the burden belongs, and I have more money.

[demdump]

"We''re here today because we made mistakes," General Motors chief executive Rick Wagoner told the Senate Banking Committee in prepared testimony.

That should have been followed by "and because of our mistakes, our organizations are facing bankruptcy. So we''re replacing all upper management, and each of us is resigning."

Perhaps UAW president should resign first,then all other Moron''s CEO.

[docpeter1953]

Geeze, some of you folks still don''t recognize lady_organs?

She is the troll gop_will_win, gophockeymom, gop_4ever, paidgopschill, and others.

Don''t respond, she is the epitomy of the hypocritical Christian.

[biblethumpar]

Lets help the Auto Industry folks, Buy a NISSAN,
let these 3 bloated dinosaur *** makers die off,
its better for competition.

[hitoyou11]

Senate Banking Committee Chairman Dodd .
Thia guy is an IDIOT. He will run the U.S. down the drain. The U.S. will go broke with him running the Banking Committee. He must GO.

[antoniof123]

Now there''''s a group that knows nothing of business!!
Posted by bm6005 at 11:59 AM : Dec 04, 2008

You are so right and Pauly is allowing it to be business and usual. He has not used any of the power to watch over the wall street crowd and neither has Bush.

They will rape us right up until the end then Bush will grant pardons like we have never seen before.

Don''t forget this it was the worst in American history the first 8 years of this century.

[misogynist10]

Its fun watching these Little Boys trying to whine their way out of the mess they created. They don''t have the votes. There will not be a bailout. Former UAW workers will have to apply for jobs in which they will actually have to work. We will be much better off driving Honda, Toyota, and Nissan. Whatever price the economy has to pay will be worth it to see the UAW extortion ring totally destroyed once and for all.