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Detroit’s Big Three CEOs testify for more than two hours in a hearing before the Senate Banking Committee, using dire language to describe the financial straits that are threatening to bankrupt their companies. Chrysler LLC CEO Robert Nardelli says that without immediate help, his company could be forced into bankruptcy. “We cannot be confident that we will be able to successfully emerge,” he says. General Motors (GM) Corporation’s CEO, Rick Wagoner, adds that the failure of the industry would be “catastrophic,” causing the loss of 3 million jobs. Ford Motor Company CEO Alan Mulally tells the committee that if one of the automakers failed, the whole industry could be disrupted. “You’re here to get life support,” says ranking minority member Richard Shelby (R-AL). “Why aren’t you making money? How would you pay this money back?”
Financial Losses Worse than Originally Believed - The automakers say that their financial losses were worse than they at first thought, with Nardelli testifying that his company ran through $5 billion this year, including $3.3 billion in the third quarter, with only $6.1 billion on hand to last through the end of the year. Wagoner says that his firm would spend $15 billion by the end of 2008, and another $10 billion in 2009. Wagoner wants $10-$12 billion for GM, while Mulally and Nardelli want $7 billion for their respective corporations. Both Wagoner and Nardelli say that their companies will run out of money in a matter of months. One senator asks if the automakers would be willing to make monthly status reports on cash flow if the Senate agrees to the loan. Nardelli offers to take $1 a year as salary compensation; neither Mulally nor Wagoner did not make the same commitment. Nardelli also committed to Chrysler’s agreeing to consider new fuel efficiency standards. “We’d be open to any requirements,” he says.
Already Cut Costs, Moved to Restructure - The automakers testify how aggressively they have moved to cut costs, restructure, and revamp their product lines to be more competitive with foreign rivals, and say their companies were making progress until they were derailed by the credit crisis that has stalled the global economy and dried up consumer confidence. Auto sales are at their lowest level in at least 15 years, they say, dropping nearly 32 percent in October. As a testament to the seriousness of their financial crisis, the three automakers assure the committee that they would spend the requested $25 billion in the United States; however, they refuse to say that they would not come back for further bailout funding. Wagoner testifies that GM has cut $9 billion in costs since 2005. He touts labor agreements with the United Auto Workers that will further cut wage and health care expenses, and says that improvements in designing and manufacturing vehicles as well as developing fuel-saving technologies will also assist in reining in manufacturing costs. “As a result of these and other actions, we are now matching—or besting—foreign automakers in terms of productivity, quality and fuel economy,” he says. Wagoner assures the committee that the company was moving quickly to right its business. “We have more work to do in all aspects of our business,” Wagoner said. “This is hard stuff.” He said that GM would use some of the money to pay suppliers and pay for part of the Chevrolet Volt program.
UAW President Grilled - In his own testimony, United Auto Workers President Ron Gettelfinger ranks the relative financial health of the Big Three as Ford being the most solvent, with Chrysler at number two, while General Motors may be at or near insolvency by the end of 2008. The UAW chief faces tough questions as well, as Senator Bob Corker (R-TN) pushes back on union work rules and the jobs bank. “I understand Mr. Gettelfinger has done a good job on behalf of all workers not working and being paid,” Corker says, calling the practice unacceptable in other businesses.
Disagreement among Democrats, Republicans - Democrats support a plan to subtract $25 billion from the $700 billion Wall Street bailout package, known as the Troubled Asset Recovery Program (TARP), while Mitch McConnell (R-KY) has joined the White House call to speed up money previously authorized for the automakers through an Energy Department loan program. “To basically change the qualifications of the money that we have already appropriated is a sound way to go forward,” said McConnell. House Democrats and many environmentalists oppose the use of the Energy Department loan, since it is approved only for projects that lead to significant fuel efficiency improvements. Carl Levin (D-MI) says that in order to get a bill, Republicans must write language that explains how they would quickly get $25 billion from the Energy Department program to automakers. But Levin is realistic about the long road they face. “Progress: No. Effort: Hell, yes. Big-time effort,” he says. “We haven’t seen progress and won’t see progress until we see the language from those who want to see the [Energy Department] funds.” Debbie Stabenow (D-MI) says she will “very reluctantly” agree to reworking the retooling loans if that was the only way to get help now. Other Senate allies of the auto industry, including Claire McCaskill (D-MO) and Ken Salazar (D-CO), opposed the proposal to shift $25 billion from TARP. “I’m not sure we want to throw good money after bad,” Salazar says. Max Baucus (D-MT), chairman of the Senate Finance Committee, says it will be nearly impossible to make a deal before Congress adjourns for the year later this week. “Reading the tea leaves, I just don’t think it’s going to happen,” Baucus says. “There’s not enough time given the opposition of the White House and opposition of the other side of the aisle.” Corker echoes the belief that nothing would get done this year, calling the hearings “the first step in a loan application.”
Further Hearings Slated - The CEOs will return to Capitol Hill for a hearing before the House Financial Services Committee on Tuesday, November 25. (Shepardson and Tierney 11/19/2008)
Max Baucus (D-MT), chairman of the Senate Finance Committee, makes several revisions to the “final” draft of the Chairman’s Mark of the America’s Healthy Future Act (AHFA, the name for health care reform legislation—see September 16-17, 2009). The “chairman’s mark” is a recommendation by a committee or subcommittee chair of measures to be considered in a markup, and is usually drafted as a bill. Baucus says in a statement: “The modifications focus largely on making care more affordable for low and middle income Americans by increasing the Health Care Affordability Tax Credit, lowering the penalties for people who fail to meet the individual requirement to have health insurance, and increasing the High Cost Insurance Excise Tax threshold for people whose basic health care is more expensive… and effectively slows the growth of skyrocketing health care costs.… This modification incorporates important ideas from my colleagues on both sides of the aisle.” According to Baucus, AHFA as it now stands will make it easier for families and small businesses to buy health care coverage, ensure Americans can choose to keep the health care coverage they have if they like, and slow the growth of health care costs over time. “It will bar insurance companies from discriminating against people based on health status, denying coverage because of pre-existing conditions, or imposing annual caps or lifetime limits on coverage.” Baucus continues to assert that AHFA will not add to the federal deficit. Some of the new provisions include:
Lowering the amount that insurance companies can vary premiums based on age, ensuring that these companies cannot charge elderly clients far more than younger ones. The provision was first submitted by Senators John Kerry (D-MA) and Ron Wyden (D-OR).
Providing $5 billion in additional assistance to small businesses attempting to provide coverage for their workers. The provision was first submitted by Senators Kerry and Debbie Stabenow (D-MI).
Including more senior citizens in the Medicare Advantage program.
Making prescription drugs more affordable for senior citizens by reducing co-payments. This provision was first submitted by Senators John D. Rockefeller (D-WV), Jeff Bingaman (D-NM), and Ben Nelson (D-NE).
Improving Medicare beneficiary access to bone density tests, a provision first submitted by Senator Blanche Lincoln (D-AR).
Creation of a three-year Medicare Hospice Concurrent Care (HCC) demonstration program that would provide Medicare patients eligible for hospice care with all other Medicare-covered services during the same period of time. This provision was first submitted by Senator Wyden.
Improving access to Home and Community Based Services (HCBS) for low income individuals in Medicaid who are in need of long-term care, a provision first submitted by Senator Kerry.
Creating nursing home alternatives for patients in need of long-term care, a provision first submitted by Senator Maria Cantwell (D-WA).
Provide alternatives to nursing home care for disabled individuals on Medicaid, a provision first submitted by Senator Charles Schumer (D-NY).
Improving access to mental health care for Medicaid patients, a provision first submitted by Senator Olympia Snowe (R-ME).
Financial assistance for “high-need” states having difficulty paying for their Medicaid obligations, and use of surplus Medicaid funds to improve the program.
Create an exemption to encourage health care beneficiaries to use generic prescription drugs by waiving co-payments, a provision first submitted by Senator Stabenow.
Remove the mandate that would require states to cover all prescription drugs for Medicaid beneficiaries.
Direct the secretary of health and human services to implement programs to reduce waste in the way drugs are dispensed to seniors in long term care facilities. (Senior Journal 9/22/2009; New York Times 9/22/2009; The Capitol (.net) 2011)
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