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Profile: Senate Banking Committee
Senate Banking Committee was a participant or observer in the following events:
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. [Detroit News, 11/19/2008]
Entity Tags: United Auto Workers, Ford Motor Company, Debbie Stabenow, Chrysler, Carl Levin, Alan Mulally, General Motors, Senate Banking Committee, Max Baucus, Rick Wagoner, Robert Nardelli
Timeline Tags: Global Economic Crises
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